I see number three exhaust valve is open and that's the rusty plug, right? That's where the water got in. Take a flashlight and look in the spark plug hole and try to look at the cylinder wall or the edge of the open valve for major rust.
The bit of play in the flywheel is telling you that the crank bearings are not stuck. I see no discoloration on the rod caps so I'm going to say you have no spun bearings.
Looks really clean inside! Someone kept the oil changed.
I would look for another nose or may be as cheap to buy another starter. That one will work for now. Put as big a washer as will fit under the bolt to get you going till you find another one.
Look directly underneath the transmission and the seasonal disconnect will be evident if it has one.
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Today's Featured Article - Magic Moments - by Tyler J. Woods. Magic moments don’t just happen. You have to help them along. This morning, I got up early. It is my day off from my regular workweek and I had a lot of things to do. It’s fall, and with winter coming on, there is a lot of work to do before weather closes in.
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