Might be a valve, might be the head, or a blowout in the top of the cylinder. We won't know until it's torn down. All my VW engines would fail before they wear out.
Anyways, replacing a fender and the steering gearbox will come before the engine. It runs but it's not streetable.
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Do You think I should start a post? Put in all the research links etc?
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Isn't that what your doing already?