Rebuild..Blown motor???
 

This is my first rotary rebuild. I bought an 87 rx non running. Drained the oil and it looked like chocolate milkshake. So I ended up pulling the motor with plans of rebuilding it. After breaking apart the rear iron plate I came to the conclusion that the inner rubber seal busted at one of the water jackets but it looks like the water jacket wall was chipped off from excessive corrosion. I figured this chip wasn't normal but after accessing the intermediate iron plate and front iron plate they each had this chip of the water jacket wall but at different locations. Now I'm wondering if this is normal. Look at the attached pic. Do I need new iron plates???? Any help is appreciated.

yep, you are going to need a new iron. just like you said it is from excessive corrosion. This happens when you don't run a lot of antifreeze, antifreeze does more than lower the freezing point, in has sacrificial metals that get ate up before the block.

you can use S4,S5 rear irons

I would also check EVERYTHING else for thin metals, it would sux to rebuild the motor and have another Iron/Housing fail

hey, thanks for the info.