Sadly, having seen the baked cam cover gasket and the previous owner admitting high oil consumption - then you're probably right that the engine wasn't very healthy in the first place. Then again we don't know the reason for the high oil consumption, a leak perhaps? Wouldn't an engine burning that much oil result in such high emissions on the MoT, enough to fail the car?
I understand that the oily, carbonised state of the camshaft housing might give engineers like you nightmares, but the only camshaft I could see, in my opinion, looked fine, no blue tint, the lobes looked fine - believe me having owned lots of Rover V8s I've seen much worse and they still ran.
Replacement engines are not too expensive this side of the border, unfortunately any replacement engine should be fitted with a new belt kit, adding more expense to May's hard hit wallet.
Regards
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