Finally back in Tarija and had a spare morning. With the help of a friend we wrapped an old fire hose around the engine and a pole, then lifted the engine out. About four hours later I had a pile of parts to clean.
It actually looks like it had been rebuilt shortly before sending to the body shop 25 years or so ago. The bearings (+.25), cylinder sleeves and pistons look new, although water got in and rusted the number 3 cylinder and a little in the #4. They might be usable.
The clutch disk is also new, but after being in the mud for 25 years, it is soggy and rusty, as are the flywheel and pressure plate.
The crankshaft, camshaft and timing gears all look basically good, although the main bearings are home-made. The VW carburetor left a lot of carbon in the combustion chambers. I'll have to find the right one.
Further cleaning shows the water pump fins have rusted through, so it won't pump much. I'll need to find another. The piston skirts have scratches on them that I'll try to diagnose. The engine was also put together backwards, with piston #1 as #4, etc.
The block apparently froze and split. The side had been welded but not the top. Aparently that crack in the top of the block allowed the sleeves in the number 2 and 3 positions to become oval, causing the scratches on the sides of the pistons. I'm having it welded.