I agree that the walls look OK. Unless you measure them its hard to say if they have a problem or not. I can see some wear on the thrust side of the bore, but that does not automatically require a rebuild. What matters is do the rings still seal? What cant be seen is the rings and the ring grooves in the pistons.

As Mikey points out a leakdown test would let you know if there is a problem.

I agree that it looks like a mess, but it will look a lot better after the parts are cleaned up. There is rust in the jacket that indicates the block might need cleaning, but most motors are very tolerant of deposits at the bottom of the jacket. Assuming your has been running without an overheating problem I don't think that requires an overhaul just based the jacket.

If I saw some serious pitting in the deck that prevented the fire ring from sealing or allowed coolant out of the motor or into the oil I would be concerned.

Short summary: You have an oil huffing problem. It could be valve guides and seals or rings and perhaps both.

There is no sure way to tell with the heads off if you have a problem with the rings.

One indicator would be how much oil were you using? I don't see a lot of washing over the tops of the pistons indicating a severe oil problem.

If your valve seals and guides are shot then a top end freshen up should help.

Remember your symptom is a huff of oil after extended idling. Unless you have a more severe problem to solve and assuming your guides and seals are shot, just doing the heads is all you need.

That assumes that the deck cleans up OK and you did not have a sever oil usage problem before hand.

Another question is what are your long term goals? With fresh heads the motor could easily get you a several years of driving. If you plan on keeping the Montero for longer than that once the heads are back on you could do a fresh motor at you leisure.

Kevin