Update: engine is out on bench and stripped. Crankcase are clean, no crap anywhere.
No sign of red hermetite so red bits on sump filter must have been fibre washer fragments - don't ask me where from! I've got one, possibly two holes to helicoil - one for the timing case cover which is stripped, and the one by the mag. Which, although the thread is good it seems to be at an angle, which prevents proper assembly of the crank case halves.
There's no indication that crankshaft shims were ever fitted, which is good and bad I suppose. Spoke to Roger at Cake Street re crankshaft balancing, but he doesn't do it, so undecided at the moment. Heads will need new valve guides, and am contemplating new valves too, also considering oil seals for the new guides. Springs will be renewed. Bores seem fine, pistons look new so won't be doing a rebore.
When I took the clutch apart, I found I'd made a mistake when I assembled it; I loctited the centre nut and had to resort to shock tactics do undo it. Am currently attempting to confirm the 0.016 end float by measuring the crank case internally, then measuring the crank shaft. Not sure if this will work out, but I'll give it a go. I was surprised how difficult it was to get the head bolts undone. They were so tight I thought I was going to break my socket.