65 Mustang 289 Swap Engine or Rebuild

Happy New Year. We have had overheating issues on this 289 and we replaced everything possible to try and solve the issue but after a compression check which showed us low levels we decided to rebuild the heads and do a valve job. Also replaced the intake and head gasket . After spending 2700 on the repairs the engine is still running hot and now has started to smoke which it’s never done in the 8 years I’ve had the car . We pulled the plugs and now we have oil showing up on the threads . I guess I’m at a point now to whether to pull it and this engine not knowing what shape the block is in with the ongoing overheating issues or bite the bullet and drop a crate engine in. Any suggestions would be appreciated as I’m afraid to put it on the road anymore at this point with all the issues I’m having . Thanks

After trying to figure out why the car was overheating we drained the coolant, high pressure flushed the block with water and with the block drain plugs removed using OTC’s cooling system power flush gun, filled the entire system with chemical rust removal for three days using two gallons of Evapo-Rust Remover with the old radiator and old water pump installed and circulated daily by running the car for about 20 minutes, high pressure flushed the system again with block plugs removed, installed a new high performance aluminum radiator, installed a new high flow water pump, installed a new 160F thermostat, installed new hoses with a stainless steel spring in the bottom hose, installed new hose clamps and added fresh 50/50 coolant. Then, we pressure checked the system and it held at 20psi. We also ran the engine while the pressure gauge was connected to the radiator (not under pressure) watching for bumps in pressure from a blown head gasket. After all that, the car still overheated. Timing was checked and we did record 30 degree initial. We dropped it to 18…it wanted the timing. Then, we check compression and #1 showed 129psi and #2 showed 40psi. At this point we stopped since we had a dead cylinder.