Thanks for the responses.
The engine blows air from both the vent and the PCV valve. It's very hot air that comes out fast, like it's from a heat gun.
And on the oil thing . . .
I have added a 1/2 quart to the second oil change. The first oil change was only in the engine for the first 1/2 hour of break in (2000 rpm for 30 minutes). Then, I replaced the filter and changed the oil.
I have topped it off twice since then, a total of 700 cc have been added after 250 miles of driving and a total of two hours of idling while diagnosis the lousy idle. However, the oil level is slightly higher than at first (was at 1/2 of the range, now at 3/4). So, I estimated about 1/2 a quart in 500 miles of driving. Maybe it's a little more, or a little less. It is hard to say with so few miles on it.
The idle is rough with periodic dips. The exhaust is clean but it sounds like a big truck (way too throaty for an Iron Duke, sounds sick). In drive, the engine struggles to idle.
There's way too much air coming out of the valve cover to be normal. And, there's no air pressure coming out of the dipstick. If the rings were leaky, then there would be blow by in the crankcase.
The crankcase vent allows the engine to ingest small amounts of air as temperature changes. The PCV valve allows air out to prevent accumulation of cylinder air that has slipped past the rings into the crankcase.
So, if there's no positive pressure in the crankcase and there is huge positive pressure in the valve cover there must be a leak into the valve cover. Since compression is 150 to 155 psi in all four cylinders, the leak must not involve the cylinders themselves. This leaves one other source of hot air: the exhuast port.
A crack from the exhuast port to the valve cover explains what I have observed.
The head was magnafluxed before the machine work was done. I insisted. Then, stainless steel valve guides were inserted into the part of the cylinder head that seperates the exhuast from the valve cover. They were in fact pressed into position. So, it is plausible that the insertion of the guides is the cause of a major crack.
Regardless, the engine is impossible to tune. The idle dips to the verge of stalling periodically in drive. In park, the idle is better, but still dips with the same period. Every sensor is new (and has been swapped with a known good used one to be certain). Two different ECMs have been tried. Two different distributors, TBIs, TPSs, MAPs, Alternator, plugs, and so on. All of it had no effect.
I have followed all of the diagnostics in the service manual and the electronics all check out as good. There are no codes on the computer and fuel pressure is a lovely 12 psi. The cat is new and the vacuum increases with RPM (a clogged exhuast is indicated by a decrease in intake vacuum with increasing RPM).
The books say that you should feel slight suction at the PCV vent hole with the filter removed. You do not. Instead you feel significant positive pressure. Remove the PCV valve too and there is still lots of positive pressure. Go turn on a hair dryer on high and you can experience the same thing first hand (no pun intended).
My plan is to pull the head and take it back to the machinist. I started this thread to see if my diagnosis was right before I took it apart.