thanks guys for the quick responses - my response was one of "frustration/depression - okay lets work through this....!"

Id like this motor do a sub 13 quarter eventually (with the Code 3). From what people are seeing - should I give up any hope or is the sludge (although horendous) somewhat superficial?

Brother saw it (he used to be a mechanic) and wasnt perturbed and said - put some Valvoine XLD 20-50 in it for a week and it will dissolve all the sludge.
Drop it and inspect - repeat for another week if necessary.
Dont use a flush - doesnt like em, for the reasons I suspected - makes all those fine now dissolved sludges, run through every nook and krany and you need to change and change and change to get it all out.
Personally - if they spec synthetics - I think I'd use synthetic - just in case minerals are bad for all te seals.