At the Lock3mann's Hardware show and swap meet a friend (?) tempted me with a
Mercury KD3 S single. I see parts worth price I paid and a reasonable chance
for an uncomplicated restoration. How do I look at a project's potential?

Having the asking price in mind I look to see if the parts value is there.
Sort of What can I lose approach.

What is missing or broken and is there any sign that motor has been stripped
of other than the always absent spark plug covers and carburetor cowl?

What does appearance say about prior care, abuse and an unskilled mechanic?

These are fairly uncomplicated mechanisms where the usual problems arise
mostly from prior care or lack of same. A junk pile motor is likely to be
either a source of parts or a consumer of too many parts. A motor that has been
well cared for and used gently will show it very obviously. An old outboard
does not have to be factory fresh to be right as is...some signs of age are
both inevitable and welcome. I have tended to stick with motors others pass by
as too far gone because I like mechanicing and have far too many tools than
is good for me....you know how that goes if you have them you use them.
Louis