Check your piston clearance. I had those same symptoms with my DMP, couldn't ever really figure it out, since there weren't any marks on my piston. Turns out, my base gaskets were starting to squish down after every time I took off/reinstalled my head; so I made a base gasket out of copper, it didn't squish down like my paper ones, and the problem went away.
Burnt red plug sounds like it's burning transmission fluid. I think Linda (mycider) had that problem with her Tomos. When was the last time you replaced the seals?
That cylinder looks so awesome, I'm jealous.