Thanks for the help so far everyone.

I have no experience with engines before now, but am thinking the heads need work and a rebuild, they're not looking particularly pretty, I know the light rusting and carbon buildup can be cleaned, but even so. I've put some pictures below, I don't know whether you could deduce anything from them...

The "bad" cylinder... obviously water has leaked in. These valves correspond to the cylinder with a gouge (which when doing the compression test was a good 5 bar/70 psi lower than the others)



This is representative of the other 7 "good" cylinders:


"Bad" intake valve:



"Bad" exhaust valve:



Representative of the "good" valves:



Also, in this one head (with the bad cylinder, coincidentally or not) all the valve guides have a notch in them, they don't look clean enough to be factory machined. The other head (all the cylinders are good) does not have these notches.


**If there are too many images, let me know and I'll make a page on my website and link to it. **

If any advice can be given on the state of my engine, and the necessity of a rebuild, it'd be greatly appreciated.