Hi josh,
I don't think I have good news for you. What you have described sounds exactly like a seized engine. It was most likely caused by straight gasoline run through a 2-cycle engine. The gas for this engine should be mixed with 2-cycle oil at a ratio of 50:1. You can remove the starter and see if it rotates freely. If the starter seems fine then it is most definitely a seized engine. You can remove the muffler and that will allow you to see down to the piston. If the piston is scarred (looks like it has been sanded with course sandpaper) that will confirm the seized engine. To repair the engine you would need a new cylinder, part #54115003004, a new piston, part #5412500800, and new piston rings, part #5402500600.
I hope this helps with your repair.
-Mark