I think i can draw a conclusion to this thread now for any future viewers to see.

I purchased this engine with a leaky front bearing from the factory and did not bother to look any further into it.

I proceeded to break in the engine with the leaky front bearing and this caused a less than ideal fuel mixture for break in (too lean).

At this point aside from the leak from the front bearing, nothing appeared to be wrong. The engine ran fine without any bearing noise.

After about 10 practice sessions at the track, i noticed the engine would not hold a tune or idle correctly. I would tune the high idle out, go out for one lap and then it would be all over the place again. The engine also made a strange metallic bearing noise at this point and the front bearing was leaking more than previously.

Upon inspection, the front bearing seal was leaking air and oil so needed to be replaced. The rear bearing was not smooth and felt slightly grindy as well as having some rust on the outer race.

The crankshaft was also rusty.

This means the rust on the crank and rear bearing outer race most likely caused the rear bearing damage in conjunction with a slightly lean fuel mixture caused by the front bearing seal failure, causing the rear bearing to emit a metallic bearing sound during running.

The lean fuel mixture during break in has probably also reduced the engine's overall lifespan.

The solution is new front and rear bearings combind with a strict after run maintenance regime, buring off all fuel in the engine for storage and removing all fuel from the tank and lines. After run oil should also be applied throughout the engine. It is also a good idea to inspect the internals of new engines before running them.

Thanks for the replies everyone