Well, I repeated the leak down test on one of the bad cylinders with the engine warm. No difference. About 25% leakage just like last time. I tried listening for the air leak sound again, and it definitely seems like it is from the top of the engine, but can't really pin point it. Nothing from tailpipe, doesn't get louder if I put my ear to the oil breather, nor the air intake filter. I guess I will be taking it back to the shop.

How does it run? Smoking?

Only on startup.

Update :
Well, after reaching close to the break in mileage recommended by the shop (so there is no excuse from them), I took it back to the shop. While I will not name the shop since they still have my car, I will make it known that this is a very reputable shop in Houston area (or at least was in the past). I had done my research and felt they were the best. They confirmed my leak down readings, and said there was leakage past the rings. Anyways, I got nervous when they told me that if the rings are broken, then it would not be covered by the warranty. After arguing that no rings should be broken in 5k miles, they claimed maybe I had set the boost too high, so it would be my fault. I have not touched the boost since I got it (I don't even know how to set boost). After opening the engine, they found the rings were fine, but there is severe non-roundness to the cylinders. Now they claim that I was probably running too lean due to bad fuel injectors or fuel distributor. This caused the cylinders to overheat, so it was my fault again. My argument is if there was a problem with the fuel delivery, the car should have hesitated or ran rough. That was not the case. Also, this engine is one of the coolest running air cooled engines I've seen. It has never even come close to overheating in the toughest conditions for the 4+ years I've owned it. These were also the people that told me I didn't need to change oil at 500 miles, and I should drive it hard from day one, counter to everything I've read.

So I'm at a loss right now. I feel like just getting the car back and trying to do it myself, or take it someplace else. At the same time, I have already paid these guys so much, I would end up paying more someplace else.

The sad part is, these people were supposed to be the best. Glowing reviews on this forum. I also feel sorry that the owner had a tragedy recently. None the less, I feel like I'm unnecessarily paying more money. Current agreement is I would pay the parts, and they would take care of most of the labor. The problem is the parts cost for relining and redoing the cylinders is not cheap. Do others think this is fair? I won't disparage them further unless they don't make things whole.

They did rebuild the engine........
They were in charge of the AFR B4 the release to you.
I know nothing except what you describe, which is to blame you rather than they shouldering the responsibility .
It is common practice to check all known parameters after a rebuild.

Are these stock OEM cylinders? and have they been bored or lined? Gives more details about what cyls and pistons are in that motor.

Fuch, this really sucks.

I hate to read this kinda stuff.

+1, They should or must test AFR before releasing it to you, WTF???

All our prayers to you Brother!

I for one would not ever install an engine and presume all is well with what could kill it !
The AFR, Oil P, leaks of any sort should and would be checked.
One does not bolt it to the into the car and hand the keys over without the preliminary .

The first time the cylinders were supposed honed, and a couple replaced with relined ones as they couldn't hone the originals properly. So yes, all was measured and fixed supposedly.

Maybe the re-lined cyls are not well done? It's possible the issue is simply the quality of the cyl and the re-line. It could be the AFRs are just fine, did anyone actually check and verify the AFRs or did they just make an assumption that the AFR is lean?

I strongly suspect the quality of those cyls, in general it's not a good idea to reline cyls, stock OEM cyls are best. What/how was the reline done?

If you have some honed and some re-lined, which ones are bad? All of them or just the re-lined ones?