OK, I've been watching the progression in this thread for over a month so here are a few observations:
- A blown head gasket was assumed in post #12 so the head was removed. No follow up on the condition of the head gasket though. Was there any evidence of a head gasket problem? Previous compression testing did not (to me) indicate a head gasket problem.
- Now we're chasing down valves. As in the prior comment, previous compression testing did not (to me) indicate a valve problem.
- About the previous compression test, going from 120 on all four cylinders to 60 on all cylinders suggests testing equipment and technique to me and I'm not alone, see post #8. Was the compression test repeated following Dave's advice prior to head removal? I do not remember reading that is was.
- The original problem was poor running and shut down in rough conditions indicating a fuel contamination problem (posts #2, 4 and 7) yet we seem to be chasing a completely different path. I did not read where fuel contamination was either confirmed or eliminated. To emphasize, the original symptom points directly to it.
- Other than time and money investments there is no downside to cleaning up the block and head, replacing the head gaskets (2 of them) and spiffing up the valves but my concern for you at this point is after all that has been done there's a chance you'll still have contaminated fuel and a repeat of the original problem.
edit: Reasoning for the above
For the compression loss to be even across all four cylinders due to either the head gasket or valves, all cylinders would have to be affected exactly the same. That just doesn't happen with valves and for such a total head gasket failure to occur with no water in the cylinders or oil, no way.