My oil pan was leaking, but I can't figure out why

First off way to much silicone. Clean it all up, make sure the edges of the pan are flat. Then order the rubber Fel Pro gasket. Not the cork gasket. I have had a more success with the newer style gasket. I do not know if they offer it in this model. But have used them successfully on later model 351s.

Yeah, I have no idea what the hell the person that did this was thinking. All I know is I have 1/4 pound of silicone I need to throw away. Plus the cylinder walls look okay (I think I can still see the hash markings) from under but I'm getting ~60% leakdown on average at 100psi with 40% going past the rings. I'm going to pull the heads today and see what's going on inside there. Hopefully they just lined up the piston rings in a stupid orientation and I don't have to hone (or bore) the block... The gaskets are mostly new enough that you can tell somebody was in here recently.

The engine has at least 50+ hours on it. When I bought it, it was over-fueling and the first thing I did was a leak down test and a carb retune. I think they were running it rich enough to wash the cylinders for some time.

Yes she sat for a while, Hard to tell if it was light rust on the cylinder walls or if they are pitted. Can you see the hone marks all the way to the top of the cylinder if you can and have no pitting. You could remove the pistons, inspect them for wear. If the pistons check out good you could get a ball hone and hone the cylinders yourself to save money. The ball hone produces the best hone pattern for the new rings to seat. They are very easy to use and produce professional results. Just make sure use use the proper grit ball hone for the type of rings you are installing. I do not recommend the 3 stone type hone they are not good for a quality job.   Check out some of the videos on them. Hope this helps.

http://imgur.com/a/Zjuyd

Piston skirts are toast, and you can feel the grooves in the cylinder walls. The engine needs to be taken at least .020 over to clean it up. No big deal. Although I've never rebuilt an engine this old before, all the engines I've had I've always sent out to specialty shops. I've got a pretty decent machine shop here in town, or is there somebody top notch I can send my block and heads to that you guys recommend that works specifically on this stuff?

I appreciate the offer, I'm going to see what the machine shop says first, I want to take as little material from the bores as I have to.

I'm actually going to end up going with an aluminum alloy, hypereutectic piston. Probably a Speed Pro or something along those lines. Definitely staying with Fel-Pro's high end gaskets all the way through the engine. I'm also going to be tossing my cam at someone to measure it all out and see what the specs look like, and if I would benefit from getting another one. Last thing, I think I've heard the marine heads are actually pretty decently ported, so I'm looking at doing a gasket match, changing out the valve guides, doing the stem seals, and we'll see what kind of shape the springs are in.

She'll purr when she's done; hopefully here in less than a month.