the 22 ounces of oil is a possible cause of engine failure. Its suppose to have 4 quarts, and that is just 0.68 quarts.
The only other question: is the bike leaking oil now, did something go thru the crankcase and leak out almost 3 quarts of oil, then it stopped when it reached the bottom of the damage to the case?
If you have already decided to replace the engine its a mute point for you, but the previous owner: yes I would be upset if the guy got distracted while changing the oil and only put 1 quart in the engine.
Its also possible the previous owner dropped the bike and damaged the crankcase, hit something and cracked it open, or he red-lined the engine by down shifting at hi rpms, someone else borrowed the bike and messed it up...
but it all comes back to the oil level - if you cant find any reason why the oil leaked out down to one quart, then that was the cause of the engine failure.
I see Vstar 650 bikes for sale with less than 10k miles on them for less than $1500, sometimes less than $1k. People park them for a couple years, the carbs are full of goo, the tires are dry rotted, the battery is dead and the tank is full of rust, but as long as the engine was in good shape when the bike was parked you can put your carbs on the engine and it should run perfectly.
The only thing you have to watch for: in the early 2000's the bike got a cat converter added to the exhaust, and I think a throttle position sensor added to the carbs - so the carbs, ECU and the exhaust are different across one model year boundary. I dont remember which year exactly. Other than that all the 650 engines are the same. I think if you just change the block and heads out, and keep the carbs and intake and exhaust and ECU from your bike you should be good.