Take a look into a neglected engine and see the sludge buildup and burned oil from a life of few oil changes. This 305 SBC engine has seen better days and is on it's way to a spun bearing or other internal damage causes by oil vanish, gum and carbon buildup.
Yes, engine should be fully disassembled, hot tanked (washed) and rebuilt. This engine did not have a lot of cylinder wear but given the timing chain wear and state of the bearings, I would suspect it would need a bore/hone and crank turned to get it back to specs.
If the engine is still in the car I have seen some suggestions to run a series of engine flush treatments over a period of time, but the idea of mobilizing all that gunk is very risky. You could end up doing more damage doing this as the clumps could come loose, clog the oil pickup screen and starve the engine for oil. Not to mention the carbon and other stuff floating around further damaging the main and rod bearings. DO NOT DO THIS!