Wow, lots of progress.
Let me try to go through that systematically.
Your shop is fine and easily big enough. The truck that is outside might a little car. Cover the engine bay and all the openings, like exhaust, fuel lines, and soon. Also, your A/C drier will need replacement if the system sits open long and attracts moisture.
The A/C compressor can be rebuilt, all parts are available. It is just a dense compressor. Any competent A/C shop can easily do that. Clutch and pulley are available from Toyota still, but also from Denso.
The corrosion is not so bad. The exhaust manifold always looks that way. If you plan to separate the manifold, make sure you have new compression rings and O rings ready. The compression rings can not be gotten in north america. Akella can get you all parts you need. The water line in that picture might need replacement though. It is almost impossible to do that when the engine is still on, so now is the time. The part is available from toyota.
Yes, too much oil in there.
As said, the foam part is a sound deadener. Ditch it.
As long as the thrust plate is in specs, it is fine. I'd replace it if I could get it easily and it is not expensive though.
The injection pump flaring is not a big deal, IMO, unless it is really excessive. The pump is on there with 90ft/lbs of torque. But your rebuild guy can tell you. A new shaft is only about 120$ and can be sourced from Denso easily. And they have to tear it down completely anyway for a good rebuild.
As Wayne said, take your crank, cam, block, head (with cam journals and valves) to a good machine shop. Bring them the 1HZ manual as well. They will tell you what's out of spec much more reliably as you can do with a micrometer. They'll check your valves too. Don't even try to get those pre cups out yourself. They are trash, but probably the shop needs to weld something onto them to get them out. Even the Toyota SST has a very hard time with old pre cups and usually fails.
For the block, pull the main cap, pull the pistons (notice the numbers), and pull the crank. Take everything off the block that you can, including the piston skirt oilers. Then bring it all to your machine shop. Once they've told you what you need and how much to go over bore (0.5 and 1 mm is possible, 1mm is the max), get in touch with Engine Australia and tell them what you need. They can get you pistons with Alfin inserts, all bearings, pre cups, a seal kit, assembly lubes, intake and exhaust valves, everything.
My guess for #2 is that it burns much hotter, and the carbon burned off.
Cheers,
Jan