The valve in that top picture doesn't look centered over the seat.
There was something bouncing around in that bore.
And the 4 point marks I think are from the head gasket, that a look at the gasket.

Hold down with your fingers the lifters for bore 5 while you rotate the crank and see if they both lift the same amount as one of the other sets that had better compression.

 

Which cylinder is that in the last picture? Is that cylinder five? It looks like there's a dent in the top of the piston.

 

BackInA88 -- the 4 points marks match up perfectly with the gasket. The gasket imprinted on the block and head. I followed what you said and the lifters for 5 lift roughly the same as the other sets.

disc oh no -- Unfortunately that last picture is from cylinder 3, I cleaned it up a bit more. It's actually a gash, and it's a bit big.

With this, I'm going to pull the engine. I showed it to a mechanic friend of mine and he thinks I should replace it. I don't know what happened to it - but I think it's finished without a rebuild. I've never pulled one before, I think it'll be a good learning experience.

 

I don't blame you. I would get the engine out and pull it apart. Maybe once you get it apart, you can find the cause of all the damage?? Keep us posted on what you find.

 

I'll definitely post what I figure out when I disassemble it. It's been a mystery for sure. Thanks for all your help!