I bet if you can pull the rotor out and mount it on your lathe you could turn the commutator down to an acceptable finish. Add some new brushes and a general cleaning and the starter will probably work just fine. After all the starter runs for like 10 seconds each time you start the engine, so in personal use the starter run time per year is minutes.
what's your time worth? You should rpelace the bearings and bendix plus a few other wear parts at the same time. My local rebuild shop does this for $100 with warranty and the individual parts cost $50. No brainer for me, I even rebuild starters whenever it comes off for any other reason. i think the savings in grief and batteries cover it.
I'm blessed. An old fella near me does the whole rebuild for $80 - $90 total but don't rush him. He can upgrade to better than new by putting in stronger field coils. He's done all my needs for over twenty years now. Not sure how good a person you can find in the big city. This is a perfect one man shop industry so there's quite a few to choose from.
I apply that test when buying used equipment too. It seems that when one part is so worn that the machine is unusable, several others may be close to failing. Accidental damage is different.
Then there was the arc welder I bought from a band roadie that had been dropped and the wheels bent, the control lever was weakly glued together and the clutch worn out, the fan was frozen, and a botched panel jack repair had shorted the secondary and smoked the winding. It was actually a fairly easy fix.
Yep, it certainly isn't great, but we aren't talking about space shuttle actuator motors here, it's just an engine starter. Turn 0.010" off of it and install new brushes and it will likely work fine for years.
That's the worst commutator I've ever seen! A no-hoper, the bar ends have separated from the insulation. In days of old, when time was cheap and mica was the insulation, that would be screwed together with a big nut and chevron washers so it could be taken apart, bad bars replaced, bad mica discs replaced and the works resoldered. Today, the whole assembly is shot in place with plastic. No disassembly possible. The only thing that can be done these days is to resurface the bars and that one's well beyond any help that would give. New one time.
For those still undercutting, this is not needed with this type of assembly, actually, it's undesirable. Junk collects in the slots and shorts the bars out. When mica ruled, you had to do that to keep the mica from whacking the brushes and breaking them as the surface wore down. With today's plastics, the insulation is softer than the brushes and undercutting slots is not needed. Wears flush along with the bars. Anything more than just scraping burrs off from turning will give trouble.
Rebuilts vary from vendor to vendor. Some joints just replace the brushes, sand the commutator, maybe replace bushings if they look like they need it and shoot a coat of paint over the works, pits and all. They depend on folks dumping the vehicle soon after to avoid excessive returns. Others will replace other parts as needed and you end up with something approaching an OEM new part. NAPA stuff should be good. Price and warranty is an indicator. I like to disassemble rebuilts and relube with my choice of grease. Also lets me check out the windings. Had one where the field strapping was just rattling around in there with brown wrapping paper for insulation. Only the packing string they used for tying things together kept it from total meltdown.
It appears to me that most of the commutator segments are ok, and the couple that look bad are the ones under the brushes when the motor finally refused to turn and were likely cooked by an idiot holding the starter button down when the motor wasn't turning. I don't think it's in as bad shape as it looks on the surface.
It will cost Iggy nothing but an hour taking it apart and playing on his lathe to give it a try.