I tried to respond earlier to your question, but the potty filter blocked me (I looked as hard as I could and darned if I could find an even marginally offensive word in it -- go figger!).
Retarding a spark (it may still be advanced BTDC, but not far enough) delays the combustion to the point that the valves open before the combusting fuel is done expanding, and it finishes burning and expends the rest of its energy in the upper part of the head. The net effect is that you have energy(heat) that has not been converted to motion. It thus remains as heat and overheats the head and can be pronounced enough to boil an engine over.
It is a new rebuild, so it's fairly safe to eliminate glowing carbon as a cause, as well as burrs. Since you've said the motor has been heated up, I'd suggest warming it up again, set the high and low idles as well as the load mixture, shut it down, retorque the head, run the valves, and see how it behaves.
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Today's Featured Article - Massey Ferguson 35 (and up) Tractor Assembly Notes - by Jack Wetmore. These assembly notes are for Massey Ferguson tractors with a two stage clutch and 6 speed, 8 speed and mutli-power transmissions. I see a lot of discussion forum messages regarding damaged clutches from improper assembly. The objective is to have the engine and transmission slide together safely and easily until the gap between the two halves is less than 1/4", BEFORE tightening any of the bolts holding the two together. Using bolts to draw the two halves together will damage the PTO
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