So I got this sinking feeling in my gut after reading through several horror stories about sunken valve seats and broken valves.
I just couldn't believe I had been driving my car this way and recalled that the first time I pulled the motor about 3 months ago I didn't have this issue and I only ran it for about 10 minutes before pulling the motor again.
I used a long screwdriver to nudge the exhaust push rod of the #1 cylinder and it popped into place. I would have sworn up and down that I had the push rods seated perfectly before trying that. They were straight from the rocker to the lifter and I had confirmed with a flashlight. I then torqued the nuts and did the valve adjustment for all cylinders.
I was not comfortable with my valve adjustment work the first time a couple month's ago but having gone through the motor a second time I learned a lot about TDC and valve adjustments. I am very confident about my work this time around.
Although I read that the #1 and #3 valves have the same TDC and can be adjusted at the same time I did not find that to be perfectly true for my motor. The same was true for #s 2 and 4.
My impeller had 2 notches but neither was TDC. One appeared to have been colored red at one point and I don't recall if I had painted it the last time I did the timing over 6 years ago. I found TDC for the #1 piston and filed a notch. I also put a notch in 180 degrees from that for my #2 & #4 TDC's. I painted my new TDC notch White, repainted the Red one, and the uncolored one I painted Yellow. I painted my new #2 / #4 TDC notch with a wide band of Silver. I did this because I thought I might confuse a dirtied white #1 TDC with a silver #2 TDC.
Thanks Joe and Cabinetmaker for your inputs.
Lapping cylinders to the heads and case is exactly that. I removed the cylinders and used fine valve lapping compound to grind the surfaces to be perfectly matched to eachother. I did not use gaskets as per the service bulletin and all the fine advice on various boards. I had leaks previously which is why I had to pull the motor a second time. The cylinders are perfectly sealed now against the heads and case.
Before re-installing the motor the first time I also filed the tops of the heat-exchangers to be perfectly flat and level to each-other as well as the flanges on the other ends and the flanges on the muffler. At that point I think that my exhaust leaks at the cylinders became more serious and evident as there was now only the cylinders for exhaust to leak... but now those leaks are closed off too.
I am now ready to reinstall the motor, tune the carbs, do an oil-change, transaxle flud (Swepco) change, install the brake pads... seems like a lot but not compared to all I have done so far... I think I will get this all done today and have my car on the road in time for a party that starts at 4 pm this afternoon... maybe it's wishful thinking.