I've done this a dozen times. It's called 'seal-n-shine'. If the motor is out, there's no better time to do it!
I assume the motor is on a stand. Lots of rags and duct tape in and on the cylinders. A little moisture won't hurt, just don't fill 'em up with water! Remove all freeze plugs then use a high pressure nozzle on a garden hose to flush out all the rust and accumulated crud from the water jackets. Remove any peripherals from the motor and Gunk the shortblock followed by SimpleGreen then plain old soap and water. Now you have a clean surface for paint. Wouldn't hurt to bottom tap all bolt holes too.
Replace the freeze plugs. Drop the oil pan. Replace the gasket and front and rear seals. Go over the cylinder deck surface with a sanding block and 80 grit sandpaper to clean it up. Now, remove the rags and duct tape from the cylinders and clean them with paper towels until the paper towel remains white. Wipe down the cylinders with 30wt oil. I agree with the other posters. Don't bother pulling rod and main caps to check bearings. Unless there's a bunch of metal shavings in the pan, it's best to leave Pandora's Box unopened! Inspect all peripherals and replace as necessary. Timing belt, idler pulleys, water pump, thermostat, motor mounts, etc.
You won't have the motor out of the car again so now is the time to fix it all! Car will probably be good for another 100k!
