That corrosion looks like plain old rust to me...from moisture. I can't say that I have ever seen rust on an ignition caused by spark.

Don't take my advice: If that were mine I'd fix the obvious ignition issue, slap it back together and fire it up. Personally, I wouldn't pull the head unless I was really pretty sure it was a problem that required that.

 

Moisture from disconnected ignition wire?
I'm with you on zero compression from the ignition. I would think coolant leak can cause low compression but not zero.
With muddy sludge and low coolant in the reservoir, I do think there's a coolant leak but the question is how bad...
What are the issues with pulling the head beside oil leaks from gasket replacements?

 

It would be a good idea to do a compression test before you move forward it seems to me. Pulling the head isn't a big deal, especially if it's not warped and doesn't need a machine shop. I have done it several times and never had an issue. Just time consuming. They sell a compression test kit at Harbor Freight pretty reasonable. Since you have it down this far pulling a head isn't going to be very hard. The hardest part in my experience is those dang rusted on exhaust nuts to pull the headpipes.

 

I post multiple forums for advice and one of the great idea is to remove #4 spark plug and stick a camera into it. Will be able to tell one way or another from that.

 

You won't be able to tell much I should think. You will see cylinder walls and the top of a piston. It won't tell you if you have a leaky valve or excessively worn rings. A compression test is quick and easy.

 

Perhaps I will see a burnt valve? Anyway, I have a camera so this will be a quick check

 

I pulled the spark plugs. No compression plug is on the right. Plug from good cylinder is on the left. Any thing obvious?
Attachment 10031
Also I need to mention that I can remove the plug from the no compression cylinder with bare hand. It wasn't torqued down at all.

 

Here are a few images from the zero compression cylinder. I don't know what I'm looking at. Please let me know if needing more images Attachment 10036Attachment 10034Attachment 10033Attachment 10032Attachment 10035

 

The crosshatching on the cylinder wall looks OK. I might have seen a scratch in there..? Looks pretty normal. The valve seats are what you need to know about. That's where you most likely lose your compression. That's why a compression test works so well. Otherwise you wont know for sure without pulling the head.

 

Perhaps my camera wasn't looking at the right angle? Plug valve would be at the top of the chamber? Plug looks to be firing?
I'm in the process of removing the old baked in gasket off the upper intake manifold. It's a painful process.