Yes a thorough visual inspection.

Yes you can fill the passages then watch and wait but it's by no means an "acid test." You could increase the chance of detecting a crack slightly by using hot water. If I had to guess the block is not cracked as long as it never froze. If it was cracked due to an overheat the compression would also have decreased and the cylinder walls would be blued. In general those blocks are about as tough as they come.

About the cooling system I've seen systems turn black in color and smell particularly if they sit with only water. Coolant is necessary to prevent corrosion. Just had amazing results cleaning a water only system with CRC ThermoCure (multiple applications).

Replace the valve seals while the head is off. Do them one at a time and put each valve back where it came from.

Could be wrong but look between the timing chain cavity and the #1 cylinder. The metal looks different there as it goes towards the first cooling system passage on the right side of the block. That could indicate a breech in the head gasket that connected oil to coolant. Oil would move toward the coolant as it's under higher pressure. How does the crankcase oil look?

Good luck!!!

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