And no water in the water jackets either. So the water damage is just from whatever it encountered during storage.
With everything that's happened to that block, and the fact that's its sitting at .060" over, I would have it magged and sonic checked before I spent too much money on it. If all the other cylinders are fine, then sleeving the one with damage is no big deal. But I'd want to make sure the other cylinders are fine first.