Quinten,
Great job you are doing on your K321!!! I really enjoy this post, and I hope the one I am about to start turns out as well as yours.
I am not an expert on the K321 by any means, but it sounds as though the exhaust valve opening slightly on the compression stroke would indeed be the ACR working. If you spin the crankshaft in the reverse direction, does this stop? If it does then it would suspect it is the ACR. If it still does this in reverse rotation, you may have something else going on.
I agree with David, oil might open a can of worms here, and I think I will feed it just a little.
Synthetic is great oil, but do not use this for the break-in!!! JMHO, I would wait at least 50 hours to ensure the rings are fully seated before switching to synthetic.
When I was younger, I was an A&P mechanic. On a fresh engine just after rebuild we would change the oil immediately after the first start-up run in which we set the timing and carburetor adjustments, and verified there was no leaks on all the seals and gaskets (typically, this was only a 15 minute process or less). Now granted this was aircraft engines, but I have also carried this practice over to any engine I rebuild. It is very cheep insurance to make sure the majority of the foreign contaminates after a rebuild are out of the engine as soon as possible (especially being as how the K321 does not have an oil filter). I would then follow the Deere service manual, and again change it after 2 hours. Deere then recommends changing in intervals of 25 hours (or 8 hours in dusty conditions). My personal process on a fresh engine, would be to change it again regardless in 8 hours (again just cheep insurance).
Non-detergent vs. detergent oils might also open a can of worms. Many recommend a non-detergent on engines without filters, and that it helps to seat rings faster. My personal thinking on this, if you change oil at the recommended frequency (or more frequently), you should not have contaminates suspended in the oil large enough to cause damage after the break-in period. And ring seating does indeed occur with detergent oils as well by normal application of light to moderate loads during break-in. JMHO I think today’s detergent oils are far superior to the non-detergent oils. I personally would use a high quality 30w detergent oil even during the break-in period. But as I noted, I would also change it far more frequently than recommended during the break-in.
Also drain the oil while it is hot, or as warm as you can handle to insure the majority of the contaminates are still in suspension during the change.
