Well, to up-date my engine rebuild:
Removed engine from car and dis-assembled down to the short block. When removing the head, I noticed, that the top of the pistons/combustion chamber was oily. Valves looked OK, dry.
The head gasket (OEM) sealing area showed oil at the narrow ares between cylinders. Not sure, if its due to not sealing at that area. (During previous pre-assy, I checked flatness in that area, found it to be good, could not get a .002" feeler gage under a straight edge.)
Oil could also have come from leaking out of upper head, while removing, so that observation is inconclusive.
The gasket is still stuck on the head and I left on, for the Machine shop Tech to inspect and investigate.
I spoke with (2) local shops to help me find the route cause.
The first shop wanted to check the cam in place with cylinder #1 still in engine. They suggested to check C/L of intake valve on the cam. (109 degrees).
I left all pistons in the engine, except removing pistom #2, in order for me to verify condition of bore, rings etc.
Re-checked all bores, presetting my dial bore gage with a mike, rather than caliper.
Bore sizes are w/i acceptable limits, less than .002" over nom. size of 3.7007 (3.701").
Inspected piston #2. Rings were installed correctly, orientation of gap on ring 1 and 2 not exactly 180 degrees. (I had installed them at 10 o'clock and 4 o'clock respectively to front notch.)
So far, no smoking gun.
First shop could not take my job, due to their back-log. (Best 3 weeks, worst 2 month lead time.)
Found another shop (Good reputation-Paul's Empire Head Shop in Santa Rosa, Ca). They have the block and head right now.
I discussed the problems i am having and asked them to do the following:
1. Verify timing of cam in the engine in relation ship to the crank.
2. Verify that cam gear is on cam correctly- no sheared woodruff key.
3. Check bores for size, surface condition of honing marks
4. Check all piston rings etc
5. Dis-assy completely, including removing of cam bearings
6. Bore and hone cylinder bores to next size, hopefully +0,50 MM (+.020")
7. Boil block
8. Select new pistons and install on old con. rods ( My choice is 1. Sealed Power, 2. ITM 3. OEM) They will assist me with selection, depending of what's is available.
(Rock Auto lists ITM at $33/ea, also saw some Sealed Power on Ebay for $73.00. Not sure, what OEM prices are...)
So thats where I am right now. Waiting for a report from my Machine Shop, what they found.
When I spoke with the shop, who re-ground my cam, he said I should set my valve lash to .012 intake and .020" exhaust. tighten if the make noise. That is based on the grind. (Standard). Not sure why, the book calls for .008" intake, .014" exhaust. That's what I set them to.
I will still investigate that further, as to why he wants more clearance.
To be continued...