Help, corrosion found.

I have an o360 that has 3hr SMOH. It was sitting in an aircraft on the coast of Florida for what I was told, about 6 months. I kept it in a storage container with the humidity kept very low. I am getting ready to install the engine and decided to take the rocker covers off to take a look. What a disappointment, the springs and tops of the covers have a considerable amount of rust. I have the log book but I am a little skeptical on the quality of work, for one it states new plugs and oil filter, they sure look pretty old to me. Also it seems to be slowly seeping oil from several places.(I do rotate it monthly) Now I think I need to at least tear it down, clean it, inspect it for corrosion and re seal it. I have never been in one these before but have a decent amount of experience with smaller engines. I think I can handle it, I need to find a good manual that will have the information I need, also would like to hear some comments on my situation.

Corrosion

Pull the plugs and get a borscope to view the cylnder walls and valves. Was it filled with oil during storage?

Engine corrosion

The cam and lifters must be checked for corrosion . They are the biggest problem in any Lycoming that sits for a long time

Rotating it monthly does the polar opposite of what you want to do. Bad, bad, bad. Oil gets wiped off things and since there's no oil pressure there's not a means to replace the wiped off oil.

First thing you should have done when you bought the engine was pull the valve covers and borescope.

By "rotating" I am talking about turning the whole engine, not the crankshaft. I plan on getting a borescope, I think I will have to tear it down, at least to look at the cam which was replaced at overhaul. Looking through the sparkplug holes I see oil which I did put some in them when I got it. They appear dirty but I see no rust, they are nitride. A borescope will tell the story on them. The inactive period was on a ramp and then on a warehouse floor for a minimum of 6 months, Im thinking longer.

Corrosion found

You need to pull a front and a back cylinder to look at the cam followers and the cam, if no spalling is found and the cam looks good, you should not need to split the case.

Keith Rhea. RV7
Donation for 2019

It may not be as bad as you are thinking - particularly if you were rotating the whole engine full of oil. That would have protected the cam. The valve cover area ALWAYS has water from running, so it is no surprise that you have rust there. Hopefully it is just surface rust. I would fog the cylinders with marine fogging oil, same with the cam area. When you are ready, get it running, warm it up good, and then flush the oil. Put in fresh oil and a filter and put 50 hours on it. Then do a borascope inspection, leak-down test, and an oil analysis. -That will tell you if you need to worry, and there is 0 safety of flight risk. You don't do open heart surgery without some testing. Same is true of an engine.
Good luck with it - it maybe just fine! ...And don't forget to use Camguard.