Okay, so I re-skimmed the thread, sorry just skimmed to the end at work b4. Sounds like you basically scored a half a grand worth of ped and parts that someone did kind of messed up, trying to fix the original problem with parts maybe. Basically what I was running for a while. I'm almost positive the above combustion chamber to exhaust leak is your problem, unless you backed the plug out for that pic. basically your charge gets pushed out that hole to the exhaust port and maybe even back in the case when it ignites. Get a decomp valve and spring, i think you can get malossi ones from the shops even, might as well get a cable and hook it up to the lever, will make it much easier to start, it will be hard to start with a kit once the compression is fixed. also coil should be grounded to the frame/motor but sounds like you did that already.
While you have the case apart might as well port match it to the kit, even an easy mild match with a file will help a lot, cause that kit mostly breathes through the piston anyway, and do the inlet to 13mm, gently and carefully, i've fucked a case up as well as many others, and you don't want to be waiting for another set. grab a roller crank if you can afford, slap it together, and you'll have a solid traffic worthy ped, even the jetting may be about right. Here's an old vid of smitty's matching that kit
till the subframe cracks that is. where mine cracked, and weakest part imo to reinforce is all those holes around the carb, i'm thinking easiest thing to do is weld a plate or something over them and just drill the hole you need to access the clamp screw.