We started out the day by verifying that the timing advance was working properly. We then began a compression test and quickly found two cylinders on the fuel pump side of the engine had no compression. All other cylinders had between 150 and 160 psi. I guess the question now is pull the head or pull the motor? There is ample room to get the head off. If by chance the pistons/ cylinders look ok would it make sense to just have the head rebuilt?

Head gasket it is. Unfortunatley the head and block are missing material where the gasket came apart between cylinders. We will be looking for a replacement engine. Thanks for all the tips.

Have you checked your fuel pump? Do you have and electric pump or manual diaphram pump? Also check your anti shypon valve at the tank these will stick and cause a very lean condition your engine will literly starve for fuel. Take out your anti syphon valve and put in a straight barbed fitting and try it again. Also tee in a pressure gauge on the inlet side to your carb start it up it shoulld run about 5 to 7 psi then take it out on the water there should be no drop in fuel pressure. There is also a fuel volumn test that you can run during crannk but I dont remember how much fuel should go into a pre mesured container in a minute but if you need to know I can look it up for you.