A head gasket burned between cylinders has failed. You were doubtless losing
at least some compression there...
In case there was any coolant leakage, be sure to change the oil before
starting the engine. Also, be sure to remove ALL bits of carbon, rust,
metal, etc. from the cylinders before reinstalling the head. A vacuum
cleaner with a tiny nozzle will help, followed by wiping with lots of clean,
oily rags. A rinse with kerosene and a CLEAN parts-cleaning brush may be a
good idea too. The concern is avoiding letting anything get lodged between
the pistons and the cylinder walls.
Make sure the head and deck surfaces are CLEAN and flat. You need to remova
all traces of gasket lacquer, etc. from the old head gasket. Minor
irregularities can be carefully draw-filed out, but any significant warpage,
low spots, etc. should be milled or ground out by an automotive machine shop.
The burned area is of course the most likely spot for carbon build-up, etc.,
and should also be carefully checked for low spots which may have caused the
Good Luck !!