As above. In Iceland, 4000 miles seems like a lot of miles! And yes on the flat tappets; looks like hydraulics. The grey color in the oil inside may be an indication of moisture, but it could have gotten in there when running.
If you don't want to pull the heads, put some Marvel Mystery Oil in the cylinders, and after the MMO sets for a few hours or a day, turn it over by hand slowly to see if it turns smoothly. It is not as good as pulling the heads and inspecting the bores, but may tell you if it is locked up or a cylinder is really rough with rust.
