Ok. Well it does have a small exhaust leak. I forget whereLikely LS1 Heads on a 5.3 LM7, not the gen 2 350 vortec. Without different pistons this is usually a bad idea, the ls1/ls6 heads flow better but the chamber is larger and results in lower compression, enough that it will make less power than the factory 706/862 heads, I'd be willing to bet that a 5.3 with a TBSS cam and LS1 heads would make LESS power than a bone stock lm7.
Yes, headbolts are TTY on LS motors. 9 times out of 10 you can reuse them with no ill effects though, there have been some tests done showing that re-used stock tty bolts have put down MORE clamping power than arp studs, which are totally unnecessary on an n/a 5.3, but that is beside the point.
Your engine may have had a cam and lifters done in the past and the metal in the pan is just a remnant of that, in the video it really sounds like an exhaust leak more than a lifter to me, you could always pull the valve covers off and take a peek. usually if the cam/lifter has failed like there will be evidence in the pushrod and rocker wear.
Maybe a broken bolt on the manifold if i remember correctly.
It sure would be nice if this was from a previous repair.
If i pull the valve covers, what exactly should i look for?
The motor from this guy sounded like more trouble than it was worth. He installed it in a 79 blazer with manual transmission and something about the kid burned up the the clutch bla bla anyway I think he said l99 heads its more than i want to do.