So I finally spent some time on the car and got the drivers side head off. Although I can see no obvious point of failure on the head gasket (cylinder 3 was low on compression) it doesn't look right to me.
It seems that cylinder two may not have been firing? Seems to be almost brand new compared to one and three. Although the head shows an even layer of carbon just like the other two cylinders.
Also it looks like there is some corrosion going on (in the red circles), is this acceptable, or is the block scrap?
Thanks for any input guys.