are you saying that this indicates ring problems? Pardon me if I am being dense I have never seen this condition before. I thought the head gasket might have failed and it leaked in to the valley area. Are you say this is a positive indication the rings are bad?
Not at all... :eyerole I was just defining for you the source of that black cristal-like material you found.
You didn't have blow-by (or crackcase venting) through the dip stick tube or other location, did you?
Its my opinion ( and everyone has one) that a compression test (dry and oil-wetted) is the best way to determine piston ring ailment in blow-by situations. Disconnect the coil ignition center wire. Tap from the cylinder (dry) with a compression gauge and obtain your reference reading by rotating the engine with the starter a few revolutions, then add a few cc's of oil into the cylinder and take another compression reading.
For an engine suffering from blow-by: If the second reading is higher, then the piston rings are causing your blow-by (the oil helps seal the pressure bleed between the rings and the cylinder walls). If the second reading is about the same (within a few pounds of pressure) then your valves (not seating properly for example) are causing the blow-by condition.
However, a dry compression test tells you that your cylinder compression is not holding up. The leak down test is also excellent, and let me tell you that cntrhub has very good points
And I noticed the condensation effects he speaks of on my 148,000 mile L81 engine. That's how I ended with practically a new engine in my car (I paid the core charge on my original block to maintain the stock option).
If you can afford it though, then take your time working on this one and buy yourself an engine rebuild kit and rework the engine...it'll be cheaper in the long run rather than placing a band-aid now. At the evry least check all journals diameters, radii, and the like, and replace all the gaskets.
Bad cams where a little less than common in those years (and there used to be a chance to recover part of your cost when the cam went flat from GM), but it did happened to me at 33,000 miles. With the heads on, one can check this by measuring the lift at the rockers and compare with the others. A flat cam will show in some cases nearly half the lift lost.
Now that you have the heads off, then check everything exposed for serviceability. Everyone will cheer you on and help you along the way.