It runs!!!! BUT!

What explains the oil in the air valve? What does washing out the rings mean?

If the reed is bad, the oil can get past it. Plug Pics?
Steve

1 3 4 are tan 2 is caked black. I'm at work no pics

I would carefully examine all possibilities before considering pulling the head.

If you suspect any issues with #2 cylinder consider the following. You probably have a vacuum operated petcock. If that is true, there is a vacuum line that runs from the petcock to the #2 carb. Sometimes the diaphragm inside the petcock fails and permits fuel to be drawn down through that vacuum line into the #2 carb throat. When this happens the #2 cylinder can run rich or flood depending on the severity of the diaphragm problem.

There are a couple ways to check if this problem exists. First is to pull the vacuum line off the #2 carb and see if any fuel is in the line - there should be none. Then you can cap off the #2 carb vacuum nipple and the vacuum nipple on the petcock and run the bike with the petcock in the Prime position. If things improve there probably was fuel coming through the vacuum line when the engine was running. If so, replace or rebuild the petcock.

EDIT - I see that #2 plug is black - definitely check out the petcock issue. Ed

Yup, you can clamp the vacuum line, run it on prime and see if it clears. If not, check the float valve.
Steve

Nope running a pingle gravity petcock. All vac lines are capped including the ports on the air suction valves. Carbs are synced and dead on.

Should I reinstall the air suction valve system? Forget capping all vac ports and leave it like it was. Am I getting funny pressures with that system off the bike?

You might try that. I'd look closely at the fuel delivery system on that one carb.
Steve

Ok will do. I will repost tonight. I'm just confused as to why to much fuel would put oil in that cylinder combustion chamber and in that reed valve

Did you replace the valve stem seals when you had the valves out for lapping?

That's right. When you press down, unless you test with a pic, it could come off.
Steve