[RCW]

The dry and wet compression test more or less focuses on the compression rings. But, milky oil is from coolant contamination.

It really depends on your intended use and budget, but if you want to spend minimum dollars I would take a different approach and pull the cylinder heads and inspect them for leakage at the head gaskets.

Unfortunately, once these gas engines get too hot they tend to warp the heads just enough to blow one or more of the head gaskets. Usually, you can fix the leakage problem with new gaskets, but sometimes it is necessary to have the heads planed just enough to get them level again.

The dry compression test is well within what I would consider good for a lot more hours of use.

If you have the budget and feel you need to go deeper and look at rings and pistons, then I would recommend a complete new engine. Once you start into these and find other problems like plastic cam gears going south, it is much more cost effective to simply do a replacement engine.