I used to use an aircraft primer made specifically for prepping magnesium for paint. It's no longer available and the products available are very expensive here in the US. You might try contacting a small local airport if you have one and see if there is a paint shop that can help.

What does work as a magnesium prep is Gibbs Brand Lubricant. I used it many years ago and rediscovered it recently.

www.gibbsbrandlubricant.com/

I know from experience that if you don't use magnesium prep, the paint won't last. A little chip and a blast from a water hose and it will peel off in sheets. If current paint is reasonably intact, it can be left in place and painted over... any bare areas may be a problem though.

Upon pulling off the left side (shifter side) engine cover, I found a good amount of what appears to be corrosion in the magneto area.
Is this just typical magnesium corrosion? Anything I should note of? Could apply dielectric grease where needed if be.

I did just scrape what I could off but didn't do too much else.

Is it sparking/running. I'd probably give it a water blast then a degrease & another water blast the spray it with crc penetrating oil. Looks like it's just been damp over a long period.

Runs & starts great... Thinking mold/mildew?