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If the bottom end looks good and there are no unusual noises, I believe I'd button it up and run it.

If your crank looks ok, You can put new bearings in without dissembling it further than you already have. The rods are self explanatory. On the mains, loosen all the caps so the crank drops down a little. Then take a soft object (you don't want to score the crank) and push the upper bearing out...

That is a slight possibility. I've seen it before. I can't tell from the pics for sure but it looks like waded up thin material rather than threads. Kind of like the material piled up on itself before coming out.

Kind of looks like bearing material to me. Best thing to do is drop the pan and start pulling caps and take a good look at the bearings and their journals. If your lucky you don't have any crank damage and can just roll new bearings in and be good. If any bearings have spun (which I suspect) the...