Chris,
The chances that these readings are valid is pretty slim. There is probably something else going on that is not allowing the cylinders to pump up. The obvious first check would be the valves. They could be gunked up and not closing, or they could have been adjusted much to tight.
A pretty standard method to take a compression check is to pull all the plugs, open the choke and wedge the throttle WOT, ground the coil and crank at least five or six times per cylinder.
The screw in pigtail for the compression gauge works the best..no pop offs. Is this how you did your test?
The engine wouldn't run with pressures like you found, and those low values wouldn't just happen overnight. Could the seller have seen you coming?
Squirt some light weight oil into the cylinders, let it soak for awhile, and while it's doing its thing, pull the valve cover and see what the top end looks like. As you roll the engine over with the fan, each rocker arm should, at some degree of rotation, become loose and you should be able to twirl the pushrod. Dig around some, all is not lost quite yet.
Stuart
