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I don't know J, That looks fine to me, I've seen way worse then that turn fine. There is a bit of wear (shine) but that should not prevent your cam from turning. I don't see any deep gouge marks, and that burnt, is just oil stain from not changing the oil. When did you replace your timing belt last? was it due? Does the belt have cracks?
You said that the cam was "Stiff" and hard to turn by hand. when you used the wrench, did it pop like it should to the next place, or did it just meander slowly? I can post a movie of me turning my "spare head" with a wrench if you have any questions on how it should turn, or how the bearings should look.
Use that redline assy lube, and you shouldn't have any problems with startup. It is a red gel that works well.
Wal-mart oil and filter are cheap, but they should suffice, as long as the oil level is proper. Also, the filter may not possess the drainback valve. Did the failure occur right after a cold start, or was the engine warm?
If you want a new head, you can get them at the pull and save for 25 bucks. Quite a deal.
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