First off are you sure it is not Header/ exhaust leak?
Anyway, there are two methods to set lifters. One that you described, turning the engine and setting the desigated valves and another method that goes something like
Set the intake lash when the exhust valve is opening and the exhaust when the intake is closing. Repeat for each cylinder.
Hydralic preload should be 1-1 1/2 turns after inital contact with the lifter. Turn the pushrod with you fingers and when it contacts the lifter and gets tension, that is where the turns start.