That engine isn't in bad shape at all. A new set of bearings can be had for about $20. Clean the rust off the crank shaft to prevent any rust from coming loose. Look closely at the cylinder sleeve and piston. if there isn't any scorng of either, it shoud be good to go. Or you can put a new piston, sleeve, and connecting rod in it.

The kind of rust you're seeing on that crank is not what one would see from a few weeks sitting in storage. That looks more like an engine that has been sitting for a few years in a humid environment. Under those conditions, even after run oil can be challenged. If the crank case is not closed off, moisture will build up due to temperature, pressure,and humidity changes.

Whatever you do, don't just pitch the engine out. Give it to someone that is willing to repair it.

Brad