By the look of the head, I would say that you have a severe water problem. Not only is the rocker gear rusted but the oil looks to be contaminated with water as it is a milky colour.
This is the motor from my GS. It looked great until I took the head off. Water had leaked from the head gasket into cylinders 2 and 3. The water has rusted the bore and around the rings
I'm taking this one out and replacing it with a runner.
Some of the REMLR boys should be able to help you through this issue.