I had the same thing with a motor on a Super24 slasher. Looked like that inside and turned over still. After a night of getting air into all that wet stuff it locked up solid in the cranckshaft.
Easier just to bin the motor.
Ive got a Utility the same as the green one above. But it has a points motor on it with a plastic carb. Not the correct engine for it. I will get it back to the best i can one of these days. I might get it back tomorrow, give my uncle his MTD back and reclaim my Victa.
Is it just me or is there something wrong with the base on yours where the front axle goes on?? Looks like the LH side in the pic is sitting too far back. Mine has sloppy clips holding the axles and a bit of wear in the height relay arms holes.