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I bought a used machine with a B&S 305 CC 1350 series OHV motor. It ran like a top, until I brought it home, filled the gas tank, and left it for a day. The carb leaked fuel all over the floor. After installing a carb kit, and trying to restart, it locked up on the compression stroke: turns out the cylinder was completely full of fuel. I could rotate it backwards with the crankshaft pulley bolt, and after working it back and forth for some time, the gas cleared out of the muffler and I could rotate it. Then I restarted, and it ran super rough and belched white smoke. I checked the oil, and found that a half quart of fuel had gotten into the oil, it was now nearly twice too full. I drained the contaminated oil, flushed the crankcase a couple times, and refilled to the right level. Still runs terrible and blows tons of smoke. I turned the crankcase breather around so no oil mist could get from the valve cover to the air intake, with no success. Every once in a while it revs almost to full RPM and runs nearly clean for a few seconds, then starts misfiring and smoking like crazy again. Thinking there must be some reservoir of oil under the valve cover, or in the intake manifold, or maybe I installed something wrong on the carb, I dismantled the whole thing, and everything looks clean and correct. There are no oil pools except by the valve guides (just above the manifolds), about 1/2 tsp in each. I cleaned that out, reassembled, and tried again. It started rough, then cleaned up and ran so-so, with not much smoke, but instead of cleaning out and running normal, it started running worse and worse until it finally died.
My question is whether it's possible that filling the cylinder with liquid fuel and then running it out past the valves could have caused permanent damage, for example to the valve guides, that then allows raw oil into the intake manifold or cylinder? Or whether running even briefly with gas-diluted oil could have done something permanent?

Sounds like you fixed one problem just to find another bigger one. You did all the right things by changing the oil and flushing it, that's for sure.
To answer your question, both of those things can cause damage. When the cylinder is filled with gas, that's called hydrolock. If you tried to crank it over hard when it was locked, it's possible to bend a connecting rod. Also, running it with gas-thinned oil is really bad for the piston rings—the gas just washes the lubrication away. I had an old tiller do that once, and the rings were shot afterward.
I think your next step should be a compression test. It's a pretty easy way to see if you have a bad ring or a valve sealing issue. If the compression is low, that's likely your problem.
Hope you can get it sorted out!

Time to do a good carb cleaning and rebuild. Problem is that the float needle is not sealing properly and allowing fuel to flow through the carb into the engine. Properly installing a new needle and seat should solve the problem. The engine will smoke and rn rough for a while, but should clear up. Would be a good idea to change the oil again after completing the repair.

Did you bother to invert the carburetor and pressure test? Need to hold 7-10 psi for at least 30 minutes. Just because thing looks good does not mean are good especially with Nikki carburetor as the bowl spaghetti gasket set has to changed after disassembly especially the carburetor has been used awhile. And these spaghetti gaskets can be imperfect right out of the package. Check the needle valve tip for ringing as that will cause leakage too.

As if there is damage only time will tell. All depends on how the engine had ran with fuel in the oil and how much fuel in the oil. Most times your okay and sometimes a rod goes thru the side of block.

No telling how many times the previous owner ran it with severely diluted gas. Got impatient and sold it to you. Fair to say?

So it could have -10w 0.3 oil in it when you got it. Then you did your best trying to get her running. Fair to say?

Very well could of trashed the engine. Hope it turns out good for you.

What I would of done is pull the oil stick. Smell for fuel before ever trying to start it. Prior to EVERY MOW, this is A MUST. Mainly keeping the oil on the FULL MARK for EVERY MOW.

Being a used machine, EVERYTHING on that mower in my opinion, is suspect. Meaning I would go through the entire machine making sure she is tip top before trying to use it.

Similar to used vehicles. All fluids get dumped. Power steering, coolant and rear end fluid if applicable. Maybe 1% of people change power steering juice if that. Normally it's black as the engine oil. Brake fluid the same.

Agree with Star Tech and Rivets. Fix the needle/seat and pressure test at 7psi for 30+ minutes. Don't use the engine till this is fixed. Then make sure you have oil ONLY in the sump.

Thanks for your replies! This engine is actually on a snowblower with an electric start. My responses:

FixitFrank, I was using the electric start, which has a lot more power than hand cranking, when I discovered the hydrolock. Could be some internal damage was done. I'll do compression test. What should the approximate value be?

Rivets, I did rebuild the carb as a first step. The O-ring that seals the gas intake, around the float valve, was completely crumbled, that was the culprit. After rebuilding the carb, there are no more gas leaks. Other than some crud in the bottom of the float bowl, the carb looked in OK shape. I soaked it in carb cleaner and blew out with compressed air before installing the carb kit. I don't think the carb is the current problem.

StarTech, same thing for the carb, it's tight now.

Slomo, when I bought it, I started it easily several times, and it ran perfectly, at all RPMs, with or without load. The oil was dirty but not milky like it turns with gas, and it didn't seem thin. The previous owner said he hadn't run it for a couple years, just fired it up that morning. He only put a few ounces of gas in the tank, so it could be that he knew it leaked. Depending on how it was sitting, any previous gas leaks could have run backwards, out the air intake, and not into the cylinder, so there were no problems. When I got it home, I changed the oil and plug, and filled it with new gas. Then after sitting for a day I noticed the gas leak. The way it was sitting, most of the gas leaked first into the cylinder, then back out the air intake. That's when I tried to start it, and it hydrolocked. (shouldn't it be called "petrolocked" or something?). Upshot: I think the engine was in perfect condition, even though the carb was leaking, until I tried to start it with a cylinder full of gas.

Still wondering if the gas, or oil/gas mixture, might have swollen or damaged the valve seal. There's a seal on the intake valve stem; if it's leaking that might explain the symptoms.