the "tarish" buildup is common in an engine with alot of run time on it. if there is no scaring on the cylinder walls, then more than likely the piston didn't seize up. the silver deposits in the oil are from wear, which isn't uncommon either. sounds like at the least is could use a rebuild, but do it right, dont just :"throw her together" it will never last that way. make sure you either have an arc rod, or at least a 28OHV rod, dont use the weak flathead rod. have the bore measured, and bored .020 over if needed, make sure you have a ring gap of .012-.014. and make sure you torque the rod bolts correctly, if not, it WILL fail. it sounds like something in the driveline seized up, and not the motor, but you wont know for sure unless you either take the motor completely apart, or run it without a belt on it, also make sure the belt guides didn't move, and seize on the motor pully.
hope this helps
Matt