038 AV - 038 Mag piston & cylinder swap??

[HolmenTree]

If I read it right you got the rewind working properly and now the engine turns over to the end of the rope.
Lay the spark plug on top of the cylinder with the plug wire boot still attached . With the switch "on" pull the rope to see if there is spark.  Try another plug if not. Is the spark orange or blue?

The piston rings are probably just seized from sitting. Also check the crank main bearings for play, with the powerhead sitting on the bench and your left forearm holding it down, try to wiggle the flywheel hub up and down. Do the same on the othet side with the clutch drum removed.  If there's play you then need new bearings.
Pull the cylinder and check rings if not seized then are wore out. Measure ring end gap.
With the piston all the way up at TDC and the flywheel locked solid from rotating, pull push up and down on the piston to check play in the piston wrist pin and connecting rod crank bearing. Remove piston and check the connecting rod again by itself .
While your at it measure the cylinder bore and see if it's 52mm.
Let us know what you found.