Honestly, there really isn't much sludge there,
it's just stained. Probably went a grand or two over on an oil change, definitely not terrible though, by any means. You should see what a GM v6 that has suffered lower intake gasket leaks (thanks to dexcool) looks like.... the oil itself looks like an orange dreamsicle, and there is black, thick stick grime caked on everything...
Definitely consider going to a 4.0 cam if it's not too late, you'll thank yourself later. The lobes are twice the size of that puny 258 cam, and it's an extremely cheap upgrade. You (except for one cam) won't find a better aftermarket grind, they're all made to produce low end torque, not streetable midrange and high end power. An electric fuel pump for a carb application is very cheap, along with the easy to find SBC blockoff plate, since the 4.0 cam doesn't have a fuel pump lobe
A BG MOA treatment, along with a few other detergents, will clean all of that stuff out of the block...