Sounds like you are on the right track, compression ring seal problems.
Your manual should show the piston clearance. The measurement needs to be taken about mid way down the skirt, 90* to the wrist pin. Typically an air cooled will run around .008 to .015 clearance. Sounds like your engine has been bored .030 over, but the clearance specs will be the same. Go by the book, not what I say!
Other things to check is the ring to ring land clearance and the condition of the ring lands. Should be about .0015 clearance new, and the lands need to be relatively flat, parallel, not tapered.
And there is ring end gap. Should be around .012-.015 gap measured close to the top of the bore. Use an inverted piston to push the ring straight in the bore.
But all this is contingent on the condition of the bore. If tapered, out of round, or scored, the rings will never seal properly. The manual will give the tolerances allowed. Scoring is not good, but sometimes it has to be allowed unless it will be rebored.
There is a lot of info on this subject on the net, Youtube. A lot of it is race engine related though, just have to wade through and see what applies.
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Today's Featured Article - Tuning-Up Your Tractor: Secondary Ignition Wires and Distributor - by Curtis Von Fange. In our last episode we spent the entire day checking out the spark plugs. Is that efficency? Actually, it took more time to explain than it really did to do the inspection. At any rate we decided that a compression test was in order so we could verify the internal engine status. That way we wouldn't buy any tune up parts until we were sure that the engine was in reasonable mechanical condition. Our tests showed a fictional compression reading of 85, 80, 82 and 86 psi. That is well within a
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