My dad and I have managed to bring back a 587 that has sat with water damage for years. We honed the cylinders and put in a set of new pistons/rings and it ran great for another 10 years. Have you taken the head off to examine the cylinder walls?
We pulled the head and it looks like the cylinder just needs to be honed. No gouging. I am concerned about the crank and don't really know what to check.