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How bad is it???? 700 1988

Now how much trouble did I get myself into with this 88 760 Turbo, last owned by a Red Neck Cowboy Looser?

Here are the symtems:
At least a blown head gasket between cylinders 1&2.
I brought # 1 to top dead center and added air pressure to the cylinder and air pressure is escaping to the crank case, into the cooling system and likely into cyllinder #2. there is no water is in the oil. Have I just lost a head gasket or is there a hole in the piston too?? Should I give up while I'm only out a couple of hundred$?

Notes: No damage to any of the spark plugs Slight moisture to # 1 spark plug. All spark plugs the porcelin has cracked and it slides up and down the electrode. Even if it was an Autolite # 64 (Moral is use Volvo plugs). A fail safe termostat was installed and it has not gone into the fail safe open position.

Thanks in advance Barry, Sonora CA






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