Ron,
Your lathe and mill will be able to do all the jobs no problem.
If you are only ever going to run it as a display model on air, you can use almost any materials to make it. I designed it to be run on steam, so cast iron was used for the cylinders and stainless for the rods. You could just as easily use ali for the cylinder and valve blocks, even the bits Darren has just made out of stainless, brass for the pistons and silver steel (drill rod) for the rods. Plus normal steel fasteners. You will need to use the right materials for where pieces are silver soldered together. So just use your imagination and enjoy yourself. It is not a bible, to be followed religiously, use whatever you think will work.
It is really an exercise in making complicated looking bits in an easy to understand way, using no super expensive workshop tooling, rather than the manufacture of a working model engine. That is just a big bonus at the end.
The crankshaft is a perfect example. If you make bearing blocks to support between each crank, you could easily make a 12 cylinder in line crank, with any angle offset you require. Try doing that on a little lathe, out of the solid.
As I said, I designed and made two, and when I show them at steam rallies, people just won't believe that they could be made by a novice to machining, with most bits coming from the junk pile. So I hand out freebie CD's with the 'book' on to those that are interested (plus of course a plug for the website).
Bogs