Re: water jacket rust, that was the first thing I noticed, too...wow!
Truthfully, I think Fiatpwr mas made a correctable mistake, by working from outside in rather than inside out. If the bores only needed a light honing then I would have done that first, then taken the block to an automotive machine shop for hot-tanking which would have done a better job cleaning the exterior, not to mention removing the fine grit from the interior from the honing process, not to mention taking a good bite out of the water jacket rust.
If reassembly has not started, he can still do it, at the low cost of having to repaint the block.
Oops just looked over the pix again, noted that internal assembly is complete and Fiatpwr did not replace main bearings. Even if on the tightest of tight budgets, I just don't understand not replacing the bearings!? Also, the honing pattern does not have the recommended cross-hatch which may affect oil consumption.