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Definitely absolutely start by pulling the valve cover and checking valve clearances...
On possibility I didn't see mentioned... and unlikely since you have 50psi in that cylinder... but check for a broken valve spring. could possibly be not allowing full closure of a valve. I've never seen it on a B20, but have on both my Ford truck and a friends Cadillac... easy to check.
Head gasket is another possibility.
Hope for anything at or above the head gasket... so you don't have to yank the engine.
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-Matt I ♥ my ♂
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