I'm looking for advice on some next-steps I can take troubleshooting my engine. Here's what I've done so far:

I recently had the top end of the engine (350) in my 1980 Corvette rebuilt. The shop tore it down and installed a new gasket kit, replaced the worn roller rockers, and replaced the push rods with the correct size.
I had the car shipped from MA, to OK. When it got here- I noticed a good amount of smoke coming out of the PCV breather on the valve cover. I went ahead and ran a dry compression test on each cylinder. I was consistently in the 175psi range except for cylinder 8 (closest to passenger seat). This cylinder held about 65psi. BIG difference...
I put about a teaspoon of oil in the cylinder using an oilier and ran it again. No change what-so-ever.
I opened up the valve cover and hand-cranked the engine over so I could readjust the valves and check the push-rods for any damage. The push-rods seem perfectly straight.
I adjusted the intake and exhaust valves for this cylinder to 0 thrash and added a quarter turn for preload. By doing this I had completely lost compression in that cylinder. I tried again, this time with an eighth turn for preload. This got me back to the 65psi I had seen before.

I'm looking for some advice on what I can do to narrow this down further, and whether or not I'm even looking in the right place. Any advice is appreciated.

 

If it had roller rockers in it before then it was obviously had some work done to it. I would set that cylinder at 0 lash or maybe even 1/8 a turn before 0 and try again. The lifter might be collapsed. If you have no notable increase you need to leak down that cylinder to figure out what’s up.

 

Sitting here and another thing popped in my head to check. Make sure your valvetrain action (lift and duration) match your other valves. Super simple to do when checking lash. A wiped cam can also cause low compression and weird valvetrain geometry issues.

 

When you say the top end was rebuilt, do you mean complete job on the heads? How many miles on the shortblock? If it's a high mileage motor, it wouldn't be uncommon to blow out the rings if you suddenly sealed the top end and the motor was old and tired. Not saying this is the case, but a possibility. Best tool to ID your problem would be leakdown gauges and do a leakdown test on the engine, with it warmed up first. That will tell you if the blow by is coming thru the heads/valves or rings.

 

Good advice. Thank you both.
Kossuth, I set lash to 1/8th turn before 0 on both the exhaust and intake, but it had no impact. I can't get past the 60's for compression on that cylinder.
I'm going to purchase or rent a leak down tester today and try it out on that problematic cylinder. I agree with both of you that those results should help narrow this down.

No work has been done on the short-block recently. It has about 106k miles on it, but I know it was re-machined somewhere in its lifetime. I don't have record of exactly when that happened, but let's assume it was at least 20-40 thousand miles ago.
When I purchased the car around 2014-2015, I know I had low 180's compression for all eight cylinders wet and dry. I didn't bother doing a test before I brought it to the shop this past winter, so it's hard to say whether or not this was an issue post or prior the work.

Thanks.

 

you are going to hear the air either in carb, exhaust or oil fill hole.

 

Try loosing both rocker arms so they are not pushing down on the push rod to keep the valves from opening - Then take another compression test to see if it changes.

 

The fact that you added oil for a wet test and did not see an increase, tells me that its not the rings.
The fact that playing with the valve lash with notable results tells me its the valve seats. Or a burnt valve head.

I am sure you are well aware that your valve lash should be one-half turn after a zero lash setting. But that's not real important yet.

Like others said: Leak Down Test Time.

 

Update:
I performed a leak-down test on the bad cylinder and a known good cylinder.
On the good cylinder, I had about 7% loss, on my bad cylinder, almost 70% loss...
The compressed air was clearly hissing out around of the valve area, and also my oil dipstick hole. There weren't any bubbles in my coolant.

Can I now safely say this is a ring or cylinder issue? Maybe I didn't add enough oil to the cylinder when I did my wet test?
Is there a good guide out there somewhere that an amateur like myself could follow to inspect/replace the ring?

Thanks

 

If its blowing out the dipstick tube Id say it was time to freshen the engine up.
If a carb engine isnt kept in near perfect tune they can wind up like this by 100k easy.

 

heads have to come off at the very least. once head is off, lay either port side up and fill port with water. see the water running past the valve. flip over and do the other one. now you need to decide if you are gonna drop the pan and push the pistons out or pull the engine.