My guess is that symptom 3 is the correct diagnosis.
If I were you I would also check the valve lift - you can do a quick and dirty
with a steel ruler with the valve cover off. These engines are sufficiently
notorious for wearing out cams and tappets that Phillips 66 (now ConocoPhillips)
has a standard test for lubricants called the Volvo B20 Cam and Tappet Test.
You probably have the D cam which is a good one. If you have to replace it
another D would be good - the Isky vv71/ IPD street perf (7001) are good ones
also for good performance and driveability.

The steel gears show up on ebay from time to time at somewhat better prices
than new and quite serviceable. The steel gear is indeed a different pitch
than the fiber gearset so you do indeed need to replace both gears.
--
George Downs, Bartlesville, Oklahoma, Central US