[GRutter]

Significant rusting could be an indication of a head gasket leak, bad head gasket, or a cracked head or block. But before I focused on all the horrible things it "could be", I would get it running. It could be nothing more than being old.

From what you described, I would begin with replacing the distributor shafts. A distributor rebuild is not too difficult, but you can also purchase a rebuilt distributor from the vendors. Be sure to also get a new lower shaft.

Check the torque on your head nuts, and torque again after you get the car running with the engine warm.

Let us know. As far as not being a well rounded mechanic, you have already demonstrated that you were able to determine the cause rather quickly. Kudos.

As the engine has been recently rebuilt, just fix the distributor, be certain it rotates freely (or purchase a rebuilt unit) and check head torque. Especially if it was rebuilt, it would have needed to be torqued until properly seated