Despite best intentions of getting other bits done, after work tonight I had a look in the engine. As mentioned before, it turns over very smooth, and I was curious how good it is.
The answer is, very! Took plug out first, torch down the hole showed a nice clean bore-no rust/tide marks/bits of mashed up cylinder. Head off, again all very good. The fasteners have been good too, soaked them in penny oil monday and had no drama so far. Anyway, the bore isn't great but it'll run I think. Bit of a lip and some scoring, so will need a rebore eventually. Still very good compression though.
Next, I took the cylinder off. Here is the crankcase:
You'd think it were put together yesterday! Can't feel any play in the big end, and once the flywheel was off it felt lovely and smooth. So I squirted some 2t oil in with a syringe, and bolted it back up. As you can see, it was last apart after red hermatite was invented!
I do strongly suspect the crankcase seals are gone (they usually are after being stood), but it is difficult to tell as there is a lot of blow-by between the ports. Probably doesn't help the magneto mount bolt holes go straight into the crankcase. Talking of that, the flywheel is unusual for villiers in having a right hand nut holding it on. Usually they are left hand, or occasionally no hand after being stripped by the unwary and a mallet.
So, next job is to rebuild the electrical sparky bits, then check in the gearbox. Might get a tune out of it soon!