Whelp! I found the problem.

No, I didn’t get any of those. Don’t recall seeing any of them in any of the boxes of stuff either. My theory is that the complete bike that was there had a blown motor (the whole bike was in awful condition, and I noticed a massive skid on one of the case covers) and so the spare motor was bought to replace it. They would’ve likely reused the original harness and whatnot. I could be wrong, there was also nearly a complete bike in additional loose spare parts as well. They did say I could come back and buy more if want to. But given the condition of everything I saw, I’m mostly inclined to source other parts I need from elsewhere. 

Plugs came out easily, and the motor turns over freely. 

I was able to borrow an engine stand and have been tearing down my original motor. So far it looks like isn’t much more damage than I was already aware of. The big end bearing inserts on the offending piston shift around and overlapped each other. They were sort of crushed together and wedged in place, but I was able to pull them out with my fingers. 
 

Additionally, the primary chain popped an outermost link, so it will obviously need to be replaced. 



Where I’m at right now is that I think I have everything that can be removed from the upper crankcase off, with the lower crankcase not far behind. I want to thoroughly blow them off with compressed air to hopefully remove any small bits of metal still left.

My question is with regards to the main crank bearing inserts and some stakings that appear to be pressed in on both crankcase halves. I’ve tried to see if they are removable, but they do not appear to be, and I don’t want to try harder using more force, for fear of damaging them. I think I could probably leave them in place, but I worry that compressed air might be all the force they need to come out, and I’ll accidentally send them flying.  



So does anyone know if they should or even can be removed? I can take closer photos if it helps to understand which parts I’m talking about. But so far it seems like they aren’t meant to be removed, so I’m probably ok to proceed with them in. 

The "stake" on shell bearing is formed in the shell to stop them doing what yours has done "know as spinning a bearing" and moving out of place. You should pop them out and clean behind them and the oil gallery. The easiest way I know to remove them without damage is to tap them in the middle with the plastic handle of a screwdriver and they "pop" out (make sure they go back where you remove them from or replace as you will probably have to buy them as a set). Then you need to measure the big end journal where the bearings have spun due to the rod coming loose. It doesn't look bad so as I suggested initially you may have got lucky.

The "stake" on the crank bearing shells also locate for the oil holes in the case. I call it a locating tab, they are really small and can easily be put in backwards if your not paying attention. When they get put in wrong you can close up the cases on that tab, its so small it will just bend to suit the space. This will result in the oil holes in the bearing not lining up with the oil hole on the case which will shut off any oil flow.

The bearing holes are ever so slightly offset, at least they are on a KZ650 which all the small KZ engines are patterned after. I put one on backwards once, it was the first engine I ever did a split case rebuild on. I put the outermost one that feeds the cams oil in wrong but luckily I saw the one side of the head was not getting any oil when I went to check valve clearances after the first start.

Once I split the cases again I could see that bearing shell had completely shut off the flow to the cams. Luckily the engine had only idled in place with no load so nothing got hurt except my pride. That was 40 years ago!

The engine will run with them in wrong which is bonkers if you think about it. This will lead to oil starvation from the crank on up which would most likely lead to catastrophic engine failure if not caught early.
 

They are correct, the bearing shells are indexed by the location lugs and can be easily popped out by tapping with a wooden mallet or soft plastic hammer. BUT….check and see what bearing color each bearing has. The color denotes size and these motors do not use identical size bearings for each journal. At the factory there are marks placed on the engine case and on the crank that tell you what size bearing insert for that journal is used. 
Your current crank (and that rod) is scrap, so you will have find the marks on your new crank. Find the marks on your engine case and continue forward. But it’s nice to go back and reference the bearing sizes that your old crank used just in case. (The engine case marks can be tricky to find)

Also the hint to look for oil starvation is gold. That rod died because of oil starvation, so it could have easily spread. I found a wad of aluminum shavings plugging up a the main oil galley in in a gpz550 motor that showed up with #3 rod welded to the crank. 

Food for thought

If I remember correctly the rod died because the nuts on the big bolts came loose? You need to inspect and measure the crank journal before you write it off 

While I’m not an industry expert, I have spent the past 5 years balancing rotating assemblies at a race engine shop. That crank is junk. 
If he had unlimited funds he could have the crank magnafluxed and have that journal welded up, reground and re-balanced. (I know for a fact they will charge more than 4x what that crank is worth)
But, remember Kawasaki only sells bearing shells to fit specific tolerances. If they could repair it, if the weld repair is not machined to within tenths/.0001 of Kawasakis tolerances, then the clearance will be wrong and it will either smoke the rod again or worse. Crankshaft repair shops can work miracles but they also charge more for them have to hit a very very tight tolerance. 
There is no difference between a kz/gpz550 crank and a Zephyr crank. 
That crank is a wind chime or door stop at this point. 
 

I'm not trying to get into a pissing contest Daftrusty. My eyes are old and I can't tell from that picture if the crank is scrap or not, I am simply suggesting "measuring" and inspect it (for free, I'm not suggesting spending any money on that crank) before getting your wallet out.

I totally apologize Wookie58
I did not mean for that to sound as if your advice was bad or incorrect. Your advice is perfectly sound and logical. 
But I just wanted to let Stereordinary know that he should not waste time and his money pursuing something that worthwhile. I’m not an expert in anything, but one of the few things I’m well versed in is crankshaft balancing and how to spot a crank that is not worth dumping money into. 
A knee replacement this week has left me with a blunt demeanor, so my tone was uncalled for. 

Again, I would like to sincerely apologize for my manner. 

Sorry guys

No worries Daftrusty, it’s all good. Sometimes the “written word” is easily misconstrued. I just see a lot of guys who through inexperience throw money at problems.
did you see my PM by the way?

Thanks for all of the input fellas. I suppose if I have to replace the crank then I also have to ask myself how bad do I want to keep this motor versus just replacing it with another one.

At present I have a couple of options.

A. Continue with rebuilding my original motor while replacing anything necessary, possibly necessitating the purchase of a whole motor to use for parts. 

B. Find another ZR/GPZ/KZ 550 motor to replace it with entirely (more on that later). 

C. Rebuild the ZX600 motor I already got and replace it with that. See additional notes below. 

With regards to rebuilding my original motor, I’m already looking at replacement of many gaskets, o-rings, at least one con rod, the crank, the primary chain, and more. Not to mention all of the hassle a full motor rebuild involves. I’ll need parts that might be best sourced by simply buying another motor.

So then if that’s the case I could maybe just buy the other motor and put that in, right? At present I don’t know of any ZR550 motors that are readily available (well there is one, but again, more on that later). I am kind of picky and don’t necessarily want to buy an older KZ motor, or a GPZ motor, partly because who knows what kind of issues they might have, but also the minor aesthetic differences. The ZR motor has more cooling fins that have square edges, where KZ motors are more tapered at the fins. Picky, like I said.

The “more on that later” thing is that I actually do know someone with a spare ZR motor, but it’s so much more complicated than that. The motor he has also has a low-end issue but as of yet it hasn’t been fully diagnosed. He said he thought it might be a spun crank bearing, which is obviously not any better than what I have. What that motor does have though, is GPZ cams, and possibly other parts I could use, like maybe the con rods. But the way I would get that motor is by buying his Zephyr entirely. He already has an eBay replacement motor mounted in it, but it needs work to get it hooked back up and running. That motor is stock and good afaik. Now, I don’t necessarily have enough liquid funds to buy it, but his price is very low. I have been trying to buy a Triumph Street Triple, and also just bought a Triumph Trident 900, so I’m kind of way overdoing it on buying bikes already. But there’s a chance that if I can sell the Trident (I like it, but after riding it a bit, it’s just not quite right for me), I might pull the trigger on it. Some of you might be familiar with the bike, it has a full GPZ-style refinish, Moriwaki exhaust, and was on display at the 1 Moto show two years ago. 


Lastly, there’s option C, which is the ZX600 motor. I maybe would have made up my mind about this already, given it sounds like an interesting project, if it weren’t for one thing. That motor looks like $#!+. It’s black, but with lots of paint flaked off, rust, and oxidization, and the side covers are plastic. I don’t want to put a crappy-looking engine in my baby, even if the engine is internally perfect and a total screamer. I feel like in order to do that and do it right, I gotta rebuild it with fresh paint, and that’s certainly not any easier than option A.