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Holy crap, gezzzz nasty job. Live and learn that's why I enjoy these forums. Brake cleaner is equated to oven cleaner to get the slug off. Than really no need to chisel the slug out.
New engine. I see.
May all go well for you.
An engine like that is a loss. That sludge is metal filings and coagulated oil. Clean it completely and you're still looking at a bunch of severely worn parts. Replacement was the most prudent thing to do.