Latest update: Removed the head and found #5 cylinder was blown out in two places.
Larger blow out was near the push rods and smaller blow out was near the exhaust manifold. I can not figure why the compression is low at cylinder #3 and #7. Ordered head gasket kit and new head bolts from roverparts.com. wondering if there is anything else I should replace while I have it opened up? Lifters? timing chain?
anything else like that?

 

you may be lucky, at least there isn't any obvious signs steam cleaning in that cylinder.
it all depends how far you want to go, you have already done the water pump and t-stat.
No sense doing the lifters with out doing the cam, likewise no sense ripping it apart for a chain and not doing the oil pump.
"I" at this point would replace the plugs and wires, throttle body heater, hoses, belt and clean the PVC system.

 

Experienced hands have noted that if push rods look like mushrooms on the end, instead of *****, and lifters won't pull up out of bore (then bottoms are mushroomed), then time for new cam and lifters (always replace as a set). You also have to consider what work can wait, and would not require head removal.

You also are going to have heads checked for flatness by machine shop (0.002 inch), valve seals installed (comes in kit), perhaps machined?

I have same issue, 40 PSI on #3, out the side gasket failure.

 

You're Welcome.

 

Post a picture or two on this bb.