Can you take the engine apart and post some pictures? Thats the only way you will know if it's ok or not. You could also look inside the exhaust port and see if the piston is scratched up.

From personal onroad engine experience I use. 16 percent nitro with 9 percent oil but add an extra 200 cc of castor for break in. Do this for a gallon and she is ready to go. You can run the engine pretty close to race tune, although it will blow lots of smoke and not have as much power as normal fuel will have but it will be almost impossible to ruin the engine during break in. Running the engine at normal running temperatures with a lot of oil is better than running the engine rich at lower temps and low oil. You will have to mess with the needles when the gallon is done. Putting foil over the head is also a good thing to do for the first half gallon.

Tower hobbies sells klotz benoil, that what I use for castor.