seetz,
The only way to properly deal with this situation is to pull the head. This will reveal any and all gasket and valve problems. For the labor involved, I would install a NEW head gasket and be done with it.
Your chore will probably involve having the head checked for 'flat' along with the intake/exhaust manifolds. Seeing absolute zero on a cylinder is rare in my book. If the valve were stuck open, it would be obvious from the top side. Overheating wouldn't instantly burn or warp a valve and even then your compression reading should be something other than zero. If it involved the intake valve you would see problems coming back through the carburetor.
A blown head gasket to water jacket would show up in the coolant and maybe in a wet cylinder. A blow between two cylinders would result in bad compression readings on at least those two cylinders. Maybe the stuff coming out near the header is actually a blown head gasket that blew to the outside near this spot.
The bottom line is...IMO, that a zero reading will have obvious associated symptoms with it that will be a clue as to what has happened.
Stuart
