RE: Tuning nightmare
worn piston and sleeve or major leak through front crank bearing. I'm willing to bet though that the whole engine is a beater.
When you buy used rc cars/truck always be very suspicious about "lightly used". These trucks can clean up to look like they're almost new and yet have several gallons of use.
Don't rebuild it! Just pay the 120 and get a new engine in trade for yours. Most hobby shops provide the exchange service for traxxas. Better yet you can try a different engine that isn't made of bee wax. Also the 2.5 cooling head is a major design flaw like with all air cooled traxxas engines. On a hot summer day it just doesn't have enough surface area to cool the engine. If you do go with a traxxas engine buy an American CNC cooling head. They go for under 20 on ebay. Don't bother with Nova Racing their cooling head is just more expensive and won't do anything extra for cooling.
Good Luck!