Good Morning Tony,
Actually, with the exception of your #1 cylinder wet reading I don't see anything to be concerned about. Before you do anything, I would suggest oiling down the cylinders and checking the pressures again to verify. If you were to tear into it, my thought would be that you will still find the crosshatching in the cylinder bores just as it was when they were freshly bored/honed and that could explain why you're seeing such the increase dry to wet. As for the wet reading, you're right on except for cylinder #1. When an engine is new (not yet broken in), it will have blow by caused by the fact that the rings have not yet seated. Did you put Moly rings in it or did you use the stock style iron ones? If you used the Moly ones, these will take a lot longer to seat and will show the drastic increase in cylinder pressures when wet. Keep in mind that your engine has been washing down the cylinder bores so you will not have as much
oil present to help seal the cumbustion chamber. My bet would be that your engine is still okay assuming that it was properly prelubed when it was originally assembled. I would also bet that the silver/grey matter you speak of is normal (for the most part) wear from everything being so new and still seating in. My suggection would be to change the
oil and filter, plug your power valve like Gerry A. did and continue to drive it and be very observant of the engine
oil pressure and presence of fuel in it and exhaust output and see what happens. I also would suggest to not drive it hard for the first 1000 miles or so. Alot of people tell me that the proper way to break in an engine is the way you're gonna drive it, but these are also the same people that just can't seem to get more than a season or two out of an engine without major problems. I have yet to open the secondaries on mine and I just rolled over 1000 miles the last time I drove it.
Again, try the wet compression test again, as I have seen false readings before. If it still shows similar readings, talk to your engine builder and see what they say. I would also possibly remove the right head and look to see if there is any obvious signs that cylinder #1 looks different from the others on the right side.
Keep in touch here so that this information can be used in the future by other club members and so you can get feed back from other members.
John