Hi,
It seems like the sidekick needs complete engine overhaul, doesn't it. I don't know how thorough one can do an overhaul for $500. Is it a going price in your area?
I have seen some rust on the inside of oil filler cap on an aircraft engine. I do believe this is clear sign of condensation. The engine is air cooled engine, I think 914 too. There is no issue of coolant loss in this case. I think the moisture is due to combustion, compression leak through the rings.
If I see condensation in water cooled engine's filler cap, first thing I would check is coolant level and color. My nose is not all that good so I don't know if I can tell it by smelling the dip stick to see if there is coolant in the oil. I may do comp check next.
Or I would just put this product called "Engine Restore" in the crankcase and foreget about it. On an engine I did comp check then used this product. 500 miles later I did another comp check. The before-score was low and not even, but the after-score was higher and much more even. I know this product works.
Maachan