Just a few pence worth:
Water-cooled engines don’t run hotter due to modern fuels, so no need to adjust valve clearances. Ignition timing maybe, but not valves.
For engines of this era the common compression figures were 130-150 PSI but the actual figure is less relevant that the difference between them – more than 10% split indicates a mechanical problem. If the valves are set correctly then it can only be rings or bore.
The gauze in the ‘dalek’ is (as Paul says) an oil mist separator. There shouldn’t be flames anywhere near here.
‘Stop leak’ is a short term fix and can do more harm than good. It’s for people selling cars. It’s like putting egg into a leaky cooling system.
Oil mist coming from the breather is entirely normal and disconnecting the breather will affect the fuel mixture. The problem is that at high engine loads / high revs the engine breathing becomes excessive and eventually you will end up with oil in the carburettor. Sellers ‘back in the day’ used to disconnect breather pipes and run them to a catch tank so they could sell vehicles to the unwary. In your car’s case it seems more the case that it’s wear and tear.
I’d suggest you follow Peter’s advice and get the engine rebuilt, anything else is moving deckchairs on the Titanic. When you get the engine rebuilt, change the timing chain and tensioner as a matter of course.
You can investigate the starter dog issue and various oil leaks at the same time.
