The oil leak I had into the water was nothing like what you are losing. The oil was floating on the water maybe a couple of tablespoons. For as much oil as you are losing I would expect the water to be a milky brown and thick, if not just rust. The compression looks like what mine was before the rebuild, maybe a little better. I also had a definite piston slap till it warmed up. I was using a quart about every 200 miles.
btw I lost that block when the thermostat stuck, and it over heated badly.
Larry
