Whoa!

Did you decide to rebuild this engine, or did it make the decision for you?
Did it give up its ghost by itself?  Your description sounds terrible!

Check the engine block for cracks!  The damage you described suggests to me
death by overheating, so I would look for damage to the engine case.  Sure,
the air-cooled vanagon has an aluminum engine block, and many people have
avered to its "bullet-proof" character.  But check for engine case damage.
It can be repaired by welding.

Please examine the old engine closely.  Do not feel pressured to post all
of your observations at once.  Just clean everything so that you can 
inspect them, and ask any questions as they arise.  This is your first
rebuild, and you will have many questions arise from now until you reinstall
your rebuilt engine.

You will need new pistons and cylinders.  You will need new cylinder heads.
You probably already know this.

It may be preferable to buy a rebuilt engine, or a partially rebuilt engine.
If no one suggests a source for a 1982 Vanagon engine, then I will look 
through my literature and see if I can't find one.

VANAGON READERS TAKE NOTE!!!  Let's help this guy out!

Wolf