I'd say ceramics inside there- avoid Teflon, if the engine is a vintage like that it'll never stick to anything properly and flake off, fouling things up.
Sad as it may sound, the most efficient small engine I had ever run was close to worn out. I gave it a set of new rings as the compression was low to try and avoid blow-by, ground the valves so they sealed tightly... the rest of the engine was terrible by modern engineering standards. That said because the tolerances were so high, every moving component had scores they sat in, and with 10w/30 oil it had so little running resistance I could stop it with two fingers on the flywheel at idle. It also burned oil from the sump which appeared to help at low-to-mid engine speeds.
The exact same model engine I fitted to my scooter (see Motorbike thread) was tight, accurately machined and still used more fuel when put onto the same application (lawn mower, not the best gauge of it, I'll admit but that was a constant load situation)...
Should do well with ceramics though internally
--Phil