coolant passages

This weekends project was to flush and refill the coolant system. Along the way I am replacing all the rubber with fresh hoses from CCOT. When initially draining the coolant I noticed that I got nothing out of the engine block drain. I added the flush and about 2.5 gallons of distilled water...

I recently bought a used engine from a Japanese half-cut. It's in great condition, except that it seems to have been left long-term with just a trace of coolant/water in, and the inside of the coolant passages is rusty. I have flushed out a lot of rust sludge with a hose, but I am still concened...