Are my eyes failing me, or is piston #2 pretty damaged? Are those still the old pistons in the block or are they used?

 

Silly question maybe, forgive me if you've already answered. What's your oil level at?

Here's my suggested dip-stick measurement method. Source = a shop with the most track hours on Kmiatas(more than KPI)
"I have my dipstick trimmed to 21.25“ total length, which is as long as it can possibly be with the Z3 pickup tube arrangement.

My HIGH level mark is at 20.0”

My LOW level mark is at 20.5“ "

 

I bought new pistons and rods for this build. That might be oil in the picture causing it to look funny.

 

If you're talking about the k-power oil pan. I cut the stick so it reaches the top of the saddle in the pan. 6 quarts of oil puts it about 1/4" on the stick. 7 quarts a bit higher. I don't see any oil starvation in the engines. There would be obvious signs on the bearings. Even the first engine that I named smoke show after death had perfect bearings.