Hey, my '75 main rider looked a lot worse than yours when I got it, but it's not too bad now:
The first thing I did was spray my frame, motor, and wheels with Gunk Engine Brite, then hose it off - it didn't look great, but it was oil- and dirt-free. If you repainted your frame and motor and buffed out the fenders and tank, I think your bike would look real nice. Even your wheels look good; all my spokes were rusty crap and were replaced, not much could be done about the rims though.
Yes, there's all sorts of CR125M and MT125 parts that can be used on the MR175. I may build one final motor for the CR-framed bike (with the custom pipe) with a CR six-speed tranny, but that's really a track-racing gearset that's unsuitable for much else. The '77 MR175 has a fairly decent gear spread (closer-ratio than the '75-'76), but the one I like best is the MT125 box. My black bike has a '77 gearbox, the other one has MT gears 1 thru 4 and an MR 5th for a little more top speed on the road.
I've never seen an MR cylinder bored over .5mm (2nd) oversize, but the Honda OS pistons/rings go up to 1mm OS (these used to be really hard to find, seems like there's more of them nowadays). Usually the OEM ignitions don't last long enough to wear out the cylinder. Don't take a chance with the rings, they'll snap like twigs if they're old and the bore's sloppy (I almost took out my exhaust port).
Ray