paint on the inside of heads flaking

Agreed, that paint will get sucked right to the bottom of the pickup which means no oil flow to the engine. can plug oil galleys to bearings,can plug up lifters.can get in between bearings and bearing surfaces and make a super heated goo that wipes out the engine...all sorts of stuff can happen. Either way its bad news.

I just hope whoever did it didnt also think it was a good idea to paint the inside of the block also? ouch if so.

some people just dont think about those things prior to doing them. I know guys that have their engines professionally teflon coated inside for better oil return but thats different.

I would probably plug up any open holes with rags and tape. spray some carb cleaner on the painted surfaces and take a wire brush and scrub it real good until its bare metal again. clean it out again with the spray. soak it up with rags and air out any loose debris. then re assemble. drain your oil and change it and the filter to.