hmm well here's a start its got the wrong o-rings in it it was lifting the head enough to blow the o-rings out. causing them to look like that, was also mostlikely eating coolant also. the heads i have found need to just about fall on the cylinder if you have to beat them on or push REALLY hard they wont tq right and are prone to blowing o-rings. also they seem to like a very flat profile and a very small squish band like around 9mm!! or even less. get VITON o-rings. get lesser squish domes ( like .49-55) and you may want to just drill out the head just a smidgin i mean just enough on the stud holes that the head goes right on and right off. the higher sqush band will make the motor rev MUCH easier and actually make more tq. and be even more potnet overall. and also make sure the squish angle is correct for the domes..
they are getting a LIL better i rember when there was almost NO dome in there adn it was ALL squish band like 15-20mm!!!! those were some detoin, o-ring eating fools
if you want check out RKtech heads they have a SWEET head/dome set up for these motors.. and witha lil bit of measuerment can make a sweet custom domes set for your motor its well worth the $$$$