Richard is making better sense.  IF I could turn the clock back,  I would have as he says cleaned things up, checked torque on the head bolts (most likely not a problem but easy to do first) rode and checked again.  Good money says the issue was just a leaking push rod seal.

I agree with him that vapor blasting is not needed.  I have never used his choice of chemical, there are a few out there that do the job.  If you want to see what kind of finish you can get with just chemical cleaning go to Brook Ream's website and take a look at the restorations he has done.

Thank you again for the input. 
Since I didn’t take the time to properly check the engine before disassembly, I figure the best thing for my own piece of mind would be to take the last few steps of disassembling and check/ replace bearings and probably source another block. 

I will probably take your advise about skipping the vapor blasting for the main case. I’ve actually got it looking really good following Brook Reams’ suggested method of brass bristle brush. The problem is that I have been unable to achieve the same results on the other engine covers. I would like them to have as uniform a finish as possible. 

I am very close to finishing the wiring harness and once it is complete and tested I will be stripping the bike and sending the frame to powder coat. While the frame is getting done, I will dive in to the engine more and report back. 

Posted by: @18691

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Since I didn’t take the time to properly check the engine before disassembly, I figure the best thing for my own piece of mind would be to take the last few steps of disassembling and check/ replace bearings and probably source another block. 

IMHO, another waste of money. Airheads simply don't show engine wear like Japanese or English bikes do. You won't find anything wrong, other than the cam chain, slack-side cam chain tensioner blade, cam chain tensioner blade spring, and possibly the previously noted oil by-pass valve. The average Airhead engine is good for 250K miles.

Airheads need the PRT Seals about every 10 years. Those 4 rubber parts are your most glaring deficiency right now.

Allow me to tell you how this will end up: You'll have $10,000 in a motorcycle worth $2000. It might look better for a week or 2, but it won't run any better or cruise any faster. 

However, if you take that same $8000 and put it in a Vanguard account, it will be worth about $120,000 when you get ready for it. You simply have to decide if you want a sparking motorcycle now, or travel the world later. 

My “best guess”? I’d clean things up and reassemble the engine. Swapping blocks is time/money intensive enterprise.  If you can avoid doing it, you’re much better off.