Engine OVERHAUL
O.K. Bill ;
Please notice I didn't say ' rebuild ' as that's not often necessary , these engines were designed to have the head yanked off and the oil pan dropped for routine service and periodic overhaul ~ you take it all apart at the same time , then the next day you drop off the head and order up the new bearing shells , pistons & rings , the parts usually come in first so by the time the head is ready , you're just about to put the oil pan back on....
The sludge thing is really serious , I wish more folks would follow my simple advice on it : Tune it sharpish then change the oil using 5W-whatever Synthetic oils and DRIVE THE DARN THING in 50 ~ 100 miles do a BLISTERING HOT OIL & FILTER CHANGE and most of the sludge will come out with the drain oil ~ some times it takes two or three HOT oil changes to get the sludge out .
Then , you can properly diagnose it and begin making a game plan .
In any case , do scrape , dig out all the sludge you can whilst the head is off .
I highly suggest dropping the pan as it's going to be full of sludge too , especially the oil pump intake screen .