Blimey Karl that is a very sorry state engine.
As you suggest much of it is recoverable but it raises suspicion with the whole motor. The sludge is definitely a mixture of oil and water and the main question is what other bits has it damaged if that mixture has been circulated. Looking at the oil filter gauze there appear to be shards of metal which you need to determine where they have come from.
The attempted assembly of the cam chain adjuster is absolutely appalling and could never work without causing further damage. I can supply the missing parts.
The main bearing shells are damaged but it is questionable s to whether or not they are still usable. Ideally they should be replaced but they are like hens teeth to find and very expensive. I have a set here but at £160 they are for an absolute emergency. It should run with those bearings but you would need to monitor it very closely and stop running the bike if you detect any strange bottom end rumblings.
Recovering that engine to new spec is a mammoth if not virtually impossible task and would not be a quick or cheap job probably costing hundreds of pounds..
My suggestion to you would be to source another engine complete or part engine and make the best out of the 2. Again I may be able to help you there also but would need the engine number.
Whereabouts are you and do you have any pictures of the bike before it was stripped that you could share?