Getting a 318 running?

Chain looks alright to me, I would run that again in a heartbeat. I am betting that engine has been rebuilt at some point - no sludge, just a little varnish, brass freeze plugs, aftermarket timing chain etc. If it were mine I would pull the heads and have a look at the bores, pull a few bearing caps, and if everything looks good put it back together. I would add a new high volume oil pump just because.

Just my 2 cents, I am sure others might think different.