Cracked Head?

[GUIDO.DAVID@PALO-ALTO.VA.GOV]

I pulled the plugs on my *new* 1981 Scirocco and found water in the # 1
cylinder. Only found 10 bar compression in the # 4 cylinder. I suspect a
cracked head. The water was a rusty color and I'm worried that over the 9
years this car has been sitting that it has ruined the #1 cylinder as well
(rings, piston).  The head has "1.6 H" stamped on it, but the engine code
says "EN" which is the 1.7 L block.  I suspect that the 1.6 head worked
with them fine and I plan to put the head from my 1980 Scirocco on it
(engine code "EJ") 1.6L.
Could I have a cracked block?
 
One more thing.. My 1980 Scirocco now blows smoke once it warms up a bit.
I checked the compression and I got 14 bar all the way across. I was
expecting *abnormal* values.. what could I attribute this oil burning to?
 
Bad valve guides maybe?
 
David Guido
1980 Scirocco "S" (2.0L conversion in progress)
1981 Scirocco "S" (gift from God I guess)

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