Update:

I followed some of your service and shop recommendations that eventually led me to Motoservizio in Long Beach, CA. The mechanic was outstanding. He promptly confirmed the problem with a leakdown tester; the exhaust valve on the horizontal cylinder needed adjustment (we could also hear the leak emitting from the exhaust pipe). He proceeded to do a full valve service on the engine.

He was able to get to good tolerances. The guides were just a hint worn, not bad enough to worry (i felt the play myself). Shim changes got it to a leakdown of 25%. We're hoping with the valves now seating properly, that there may be some gunk on the seat that will clear away soon enough allowing the valve seating to improve just a tad more.

Even if it doesn't improve, this seems acceptable for a light recreational rider (like myself) who rides 25 miles per week and watches the temp and oil gauges religiously.

BTW- some of you may recall my other posts trying to sort out a low idle problem. Once the above service was completed, the idle was restored. We synchronized with a manometer to confirm. I never would have guessed that poor leakdown was the root cause...

Other nifty finds:
The previous owner was using a spark plug that was one range too hot. I replaced the 8's with 9's. Heat dissipation everywhere is critical when the valve can't dissipate heat fully because of slightly worn guides and imperfect seating.

Hole punched into the fuel pressure regulator. Someone trying to access the internal screw to increase the pressure?

Thanks for all your help - good to have the bike cleared for use. I'm going to reward myself with a rear tire and a set of brake pads...