It took me awhile, but I finally got it back together a few weeks ago, but today was the first time I was able to run it. Rain, mud and other projects have all been getting in the way of moving some dirt!!!
The oil rings were fried. They were wornd down smooth with the sides of the pistons. Nothing at all sticking out past the width of the pistons. So mystery solved, I sanded the engine. I showed them to the guy at the machine shop and also the bearings. He said a few of the bearings were a little worn and I should replace them to be safe. Otherwise, the block was fine. I also replaced the compression rings.
On my first load, I noticed that it was smoking real bad from under the hood. The valve cover gasket was leaking oil onto the exhaust manifold. I took it off and saw that the gasket was broken. I had a brand new tube of gasket sealant, so I just put it on real thick. Then when I went to put the air cleaner back on, the threaded part that goes into the carburator broke off about halfway in. I taped up the carb to keep it clean, then drilled a hole into the broken part and pulled it out with an easy out. One load of dirt moved and it was already noon.
We moved a dozen more loads of dirt when the smoke returned. I figured it was the same problem, so my dad volunteered to go to town and get a new gasket. I pulled off the cover and found that it had broke in a new place. I might be a little slow, but two breaks on a valve cover gasket just seems a little odd.
With the new gasket on, we went back to moving dirt. I loaded it with the backhoe and he drove the dump truck. There was one time when it wouldn't start, but after letting it run for awhile, it didn't happen again. Right after that starting problem, my dad said that it felt like there was less power too, but that went away. I did notice that the fuel preasure valve was set at 2 pounds, so I raised it to 4 1/2 half pounds. That might have been the problem, but I don't know how it got to that level and why the power issue wasn't from the start.
The axle is leaking oil again too. It leaked when I bought it, but the new seal didn't hold. Another seal failed, and then the third. This is seal number four, and all four seals are from different stores. Obviously it's either a bad axle or a lousy mechanic. Probably the mechanic.
I received a new air filter in the mail from a friend who I'll just call the Air Filter Fairy.



It's a full sized monstrosity that I just finally figured out where to put it. With all the rain we've had, dust isn't a big concern right now, especialy with all the effort that I put into sealing up the factory air cleaner. My plan is to mount it behind the grill, upside down so that when I take the lid off, the dust that is outside the air filter will fall to the ground. There is a massive hole on the ousdie of the metal container to let the air in. It's on the side, so I either have to have it facing down to let the dust out, or do it this way. I bought some ducting that will make my turns, so now I need to weld up a bracket to mount it.
I'll post pics of it when I get done.
Thank you to everyone for all your help and advice,
Eddie