D-361 C1 Block

I acquired a D-361 short block with a C1 suffix on the part number from a salvage yard about 5 years ago. I was thinking about using it and looking it over more closely I noticed that the valves must have been hitting the pistons. The block had silver paint on it and was told that it had 400 hours on it since overhaul and speculated an injection pump problem. The liners were not scored but the pistons were messed up on the top. Can anybody figure out what might have happened during the overhaul. I pulled the front cover off, the crank and cam timing marks were correct. Maybe a 407 crank instead of a 361 crank? Wrong cam shaft? Why the silver paint? Did the silver C blocks come from the parts department or other applications?
 
If it had the wrong crank I would think with a 1/16” more stroke on the top end it would have locked up after the head was installed. I may be wrong.
I think you are correct. If during assembly an inexperienced person adjusted the valves incorrectly it could have caused that. Possibly putting in seats with improper seat height could have put the valve/s too close to the piston. Jim
 

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