Guess I didn't explain enough. I did a leak down test. I got 18% leakage from #2 (the worst cylinder) and 8% from #4 (the best). It was leaking at the rings. Oil did stop it.
The funny thing is #4 tested best but was the spark plug with the shiny stuff (oil deposits).
Guess I'm looking at a ring job.
All this was done cold. I will re-test warm when I get a little time...
Thanks
One thing to keep in mind on these engines: the metals used in them was, um, less than the best. As a result, the cylinders became shapes other than round in about 10,000 miles in most cases. Mostly, new rings did not fix this problem of sealing when this occurred, but boring to first oversize permanently fixed it, as the cylinders had cured, and the new bores would not reshape. The standard racer's setup on these bikes was to get one, ride it 5k-10k miles, bore to at least 1 oversize (.25mm/.010") and gain back as much as 10% HP. On my 750, for example, at first oversize, it picked up a little over 5 HP.
As long as you're taking it apart...first or second oversize, and how about a port job, which really wakes up the 500/550? If you match the piston weights in the process, the smoothness afterward can become like an electric motor on those bikes. My brother called it the "Gold Wing effect".