I did another leak-down test after lapping the valves. This time the results were better, but pretty inconsistent. The leakage numbers were between 5 and 25%, and you could clearly hear the air escaping past the piston rings. I decided that continuing forward would cost me much more than what I paid for the engine, so it went back to the scrap yard for a refund.
For the next engine I spent a little more and got an L33 aluminum block. These came with 799 heads, which are pretty much the same as the ones that came on LS6 Corvette engine, minus the sodium filled valves. It was a little overpriced at $1200 CAD, but I couldnt afford to sit around waiting for a good deal. The engine looked pretty clean, and only had 80,000 miles.