Before you start yanking the engine, do a little more diagnosis. Try a "wet" compression check, with an ounce or so of oil in the low-pressure cylinders. If the pressure rises noticeably, you've got piston ring troubles and it's time for a rebuild. Little or no pressure rise, and the problem is stuck, or burned valves. You can do a valve regrind, and nurse some more life out of the engine, or you might be able to unstick a valve with a dose of penetrating oil like Kroil.
There's also a procedure called a "cylinder leak test" where air pressure is put into a cylinder with both valves closed, the transmission in gear, and the brake set, to keep the crankshaft from turning. Air coming from the carburetor indicates a stuck or burnt intake valve (backfire), air at the tailpipe indicates a stuck or burned exhaust valve, and air from the oil filler indicates leaky piston rings. Bubbles in the radiator indicate a cracked head or leaky head gasket. Now, you KNOW what's wrong, and can take appropriate repair action. Sun Electric Co. used to have a slogan on all their testers: "We Test, Not Guess!" It still works today!
Jerry
