Showing my rotor housings(6 pics)
 

Well heres pics of this "rebuilt" engine that I finally tore into. This really pissed me off as I paid $2000 with this in it for a car worth about $500. The engine never ran for me, I had to fend myself and get another one.

https://img310.imageshack.us/img310/9243/flake1pi9.png
https://img466.imageshack.us/img466/8583/flake2ln2.png
https://img387.imageshack.us/img387/8793/flake3em2.png
https://img319.imageshack.us/img319/1937/flake4rp1.png
https://img243.imageshack.us/img243/...usings1ur0.png
https://img302.imageshack.us/img302/834/rotor1fa3.png

I def would not reuse those housings in any of my rebuilds, and is that pitting on the face of the rotor?

ALL of the old 85- rotorhousings will flake like that, even with LOW miles. In fact, that is pretty small amount of flaking compared to what they usually look like. This is why I really dont build the old motors, because no rotorhousings are reuseable, and new ones cost a lot. What you see is likely not a build error or bad parts used by the builder, its just what happens with the old housings. As time went on the housings got better and flake less.

Also, such flaking wouldnt cause the engine not to run...just perhaps be weaker on compression, IF the flaking is also present up at the top of the housing. Even with 85psi of compression an engine will still start and run fine, just idle rough and be hard to restart hot.

Im sorry I wasnt clear on the reason it didnt run. For one there was like 2 compressions that I didnt bother the messure. I believe the rear rotor had stuck side seals and an apex seal so bad, the side seals took me 3 days to get off, and in about 100 pieces.. What do you think, should I just stay with 2nd gen engines (have an 88 running now) or get these coated? Eaither the ceramit or what ever?

Use FC irons and rotorhousings, and reuse the SE rotating assembly if you like the 3mm setup. Or, go on ahead to the lighter 2mm FC rotating assembly. Really there is nothing in the early engines that was not improved upon later, and the NA FC engines/parts are available for almost nothing. The few SE engines I've been asked to do, I just tossed most of the original stuff and built an FC block with the SE front cover and oilpan, and FC intake manifold/throttlebody with SE fuel and wiring. They run pretty strong that way.