I need to follow up on this thread after having the k-liners installed.
The suspected excess clearance beforehand was verified by inspection. The inlets were about 3.5 thou". There was some confusion about the exhausts. The reconditioner thought one valve had worn 3 thou" but when we measured it when it was left over after the head was back together with a new one - it was standard. I didn't get exact before measurements for exhausts therefore, but I believe they were sloppy. There was a lot of black deposit up both. He thinks that was evidence of pressure escaping up there - a suspected factor in crankcase pressure.
Anyway, we agreed on clearances with k-liners of: 1.5 thou" inlet; 2.5 thou" exhaust. He was pleased with his success after we had to order new inlet guides because one cracked. One other thing I did to mitigate crankcase pressure is to extend the holes in the timed breather valve. These were Dremelled out to the right (with hole on top) - according to the guidance in Roger Sharman's article. This makes them 12mm in length. They would open a bit earlier therefore and not allow as much pressure buildup on the downstroke. I know I can't isolate this from the k-liner effect, but I hope one of these measures will stop the drive-side seal blowing out. (The cork breather is good and compressed).
So the bike now runs very nicely. It is the best performance I have experienced with it. However, it still smokes a bit...I have measured the oil consumption and it is back to 1 pint in 200 miles. This is the best I have ever had but it's not good. This pint-in-200 is a standard that "one shouldn't worry if it was no worse than", apparently. I followed Jay on our ride back from Makara yesterday. He swapped onto the A10. The puffs were intermittent and alternate between left and right. They seemed to be when he revved after slowing down, what you call the "overrun" - which still suggests oil down the valve guides to me?
Anyway I will just run with this and see if the drive-side seal stays in place. The next step if it doesn't is a rebore. Remember I have the Total Seal gapless ring set. I have my old 8.5 to one comp pistons (BSA?). The clearance wasn't too big there apparently, but my engineer thinks there's a "scratch in one bore" where it rusted during years of sitting. This wasn't removed totally by the last honing apparently (about 2k miles ago). I think these rings have bedded in. They are supposed to "compensate for engine wear". I didn't get valve stem seals put in because this may have "starved the oil supply" a bit. They seem to be meant to compensate for wear too but we thought unnecessary with the k-liners. Total Seal do recommend seals.
I'm hoping that the remaining oil consumption isn't associated with factors that still might cause excess crankcase pressure (like piston blowby). If so, I'll just live with a bit of occasional smoke for now.
Thanks for listening and all the help so far...