Silicone at the base of the Heatsink? Sounds nuts to me. The combustion chamber is sealed by the head gaskets/shims & proper torque of the head bolts. If those loosened & leaked, the only purpose the silicone could have, would be to mask the problem temporarily. It could not possibly contain the combustion pressures.
The slight surface rust on the counterweight, is nothing to worry about. Just be carefull not to nick the crank pin when cleaning up the rust.
Engine may have died from getting the air filter clogged or soaked. The rust on the crank, probably had nothing to do with your mud bogging.