Great info on the old XR ... unfortunately may not help the OP retrieve his lost cash.

XR's always ran HOT ... and the above description about the flawed radial valve head is spot on. Rocker/cam bearing wear is what I remember to be a common problem on XR's. My first XR type bike was actually an '87 XL600R, similar to an XR engine. I later bought a used XR600 in round '93, sold it off for an XR400R.

One thing I was taught to do on BOTH XR's was to take out the Dip Stick at the steering head (Oil in Frame) when the bike was running, and watch the oil squirt across the opening from the oil return line positioned there. Good way to ensure oil pump working. Should be a FAST, healthy squirt of oil!

My guess (for the OP) is that oil pump was clogged (or partially clogged) before you bought the bike and the motor melt down is not your fault. But proving that and getting back your money may be impossible. Sure, it was overheated, but not by YOU but probably by previous owner. Not hard to overheat an XR, and if you let them get low on oil ??? Disaster.

Best thing to do when you buy 2nd hand dirt bike you are not familiar with is take DIRECTLY to a trusted mechanics, fully check everything on the bike. It's worth the money ... even if it doesn't find any fatal flaws .... just for the peace of mind alone.

Sorry for the bad luck. Lots of old XR's around ... maybe you can find a nice used Engine somewhere?