G'day Azubi.
Ouch that looks nasty
Is that the top half of the piston still in the bore?
* Yes a full strip down and rebuild.
* Depending on condition most of the work can be done with a modest set of tools. Crank grinding, boring of barrels & timing side bush will need to be sent out to a reputable machine shop.
* Yes thick flange barrels will fit with longer studs. (I wouldn't reuse those barrels).
* See above. It would be possible BUT
* Pretty straight forward removing the primary.
Loosen the cush nut first (do not remove) Then the clutch center nut, back the chain adjuster right off (I remove it so it's not in the road but not necessary). Now remove the clutch plates and hub and the cush nut & spring. The sprocket and clutch chainwheel will come off together (with chain still attached).
I like to remove as much as possible (dynamo, magneto, timing gears etc) before removing the lump. Quite heavy with the gearbox attached. Reminds me of the first time I did it. With no book or internet (1982) I tried to remove the gearbox first
Best of luck with it mate. Take your time and if in doubt of anything ask and you will get answers.
Cheers