You either have worn piston rings for that cylinder, or a blown head gasket.
Since the compression increased after adding oil, you've eliminated the valve guides, hole in piston and failed timing chain as possible causes. The reason the compression increases during this procedure is because it temporarily fills up small voids between the piston rings and cylinder walls, as well as tiny leaks in the head gasket. The oil wouldn't be enough to stop larger leaks such as a hole in piston or valves open at the wrong time.
This may have occurred because of the wrong break in procedure for your motor or a mess up at the factory. Because you engine is low miles, I'd rebuild it instead of buying a new/used motor.
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Thursday, February 10th, 2011 AT 1:05 AM