It seems to me that the piston crown , especially in the area near the exhaust valve, became overheated and 'plastic' allowing the ring groves to distort and eventually for the end of the top ring to break through into the combustion space right under the exhaust. At the time my ignition at full advance was 36 BTDC.
The replacement setup, same make of piston, new muff n liner with 0.0045" piston/bore clearance was rebuilt but this time with ignition at full advance 34 BTDC. After around 8,000 miles noticed compression was a tad low so pulled the barrel only to find the same thing was happening - distortion of the ring groves - but not as severe as earlier.
Again new piston, this time 0.020" oversize and rebore with 0.005" clearance and fitted a decompression plate under the muff. Still with 34 BTDC - result was a surprise seat-of-the-pants slight but noticeable improvement in overall performance.
It was only recently that as I explained in post #3 that I have now changed the ignition to give full advance at 30 BTDC, full retard at 4 BTDC. Went for a short run yesterday (COVID rules mean I cannot travel more than 5 km from my home) and was very pleased with the performance, definitely improved torque on the hills.
I am running the original magneto. I stripped the ATD down, added metal to the fixed ears then filed the added metal back to give the advance range I wanted being 13 at the magneto that yields 26 at the crank. The hardest bit of all is setting the timing as the ATD tends to move as you tighten the retaining bolt. Patience and swearing helps!
Martyn