Oh FFS that head stock has never been greased, at least not since it was in the factory, it's a wonder it never locked in place. At least the lower forks look better now (well done) if it was mine I would do the brakes anyway as the PO seems a bit of a tit. While you have it apart check that the brake hoses are not stretched or cracked, if they bulge when you apply the brakes they need to be replaced, I bet they were the originals, if you do decide to replace them buy stainless steel wrapped ones, a bit more expensive but give you a much better feeling brake. Nice job so far keep it up.
Something like this