Ok, Fast 68, they finally broke the 512 out of the Ruster Duster and found the problem. When peering into the cylinders with a borescope they saw what appeared to be a scratch in one cylinder.

When they pulled the piston out, part of the bottom oil ring had been pulled out of it's groove and had been eating into the cylinder wall. Once the block arrived at the machinist it was discovered that cylinder was actually cracked.

Assembly error caused the problem with the ring and led to the crack, or the crack grabbed the ring? Don't know, but the block is getting a sleeve as I type this. Hell Week as officially began!