was told by someone here to check valve stem seals. the o ring type seal was not really good and may be the prob. i have a 60 261 w/ a similar pr0blem and am going to check the valves first. like forty9 said, if it is a powerglide motor w/ the hydraulic lifters, you may have something hanging open as well

"it's only old if you can't find a use for it; otherwise it's cool and i'll use it."