Well, I made a little progess.. collected a couple parts along the way. I pretty much completely disassembled the entire motor checking just about everything. I din't find any problems with the motor itself, everything checked out fine.. cylinder walls, piston rings, main and rod bearings, head and etc all looked to be in the condition I expected of a ~20k mile engine. I'm just getting this thing completely cleaned up before I reassemble and drop it in my car because I'm anal about cleanliness. Also I have to make some provisions to head requiring me to dremel a passage in the head and blocking off the existing ports so that the water will properly flow since I'm converting the waterlines from FWD(in and out the back of the head) to RWD(in and out the front of the block). Here are some of the pictures I have of what's going on:
Something like this:
http://img.photobucket.com/albums/v233/sportcarae/corolla%20hatch/P1016104.jpg
http://img.photobucket.com/albums/v233/sportcarae/corolla%20hatch/P1016108.jpg
Tearing it apart:
http://a638.ac-images.myspacecdn.com/images01/69/l_dedc57a803fe576226d2db04007fc19d.jpg
http://a948.ac-images.myspacecdn.com/images01/117/l_71247afed4ca6fc1196bea78f885f5d3.jpg
http://a839.ac-images.myspacecdn.com/images01/54/l_1c9ff954813b9a1a0de71632754abbde.jpg
http://a864.ac-images.myspacecdn.com/images01/13/l_f4ef901f1f25640c9bc16da5bb66fd2f.jpg
http://a481.ac-images.myspacecdn.com/images01/98/l_c0357c9e6473aa5d00fe5f19f4b3a6b0.jpg
http://a722.ac-images.myspacecdn.com/images01/95/l_2a8f35e91971c3e97259ba31742f6441.jpg