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At 1 qt/400 miles, I think at least a top end rebuild w/ a valve job is in order. The bottom end, it's up to you.
Mr Bixen's point on the IS bearing wear not being a huge deal is highly informative. Pay special attention to what pros like him say and recommend. I was wondering how much load that bearing gets during operation for a while given many tear downs reveal good crank/rod bearings but show IS wear.
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