RM the baffling looks fine. It's similar to mine. The best you can do is to bring it as close to the fins without hitting them as you can. In weedwackers, the baffle is touching the fins in some models. Nothing wrong there.
I've played with header length some and doubt there's anything wrong there.
The needles are plenty fat especially the LS. I've run 2 of these engines so far and both sets of needles were set-up just about the same.
For what its worth, the heads on mine look the same. It doesn't look to me that anything came off the head. Threads look as they do due to the angle of the cut.
It probably would not hurt to send it in to Hobby Services and see what they can do for you. As meticulous as we are with our Pattern engines I believe there was something wrong with the engine. I agree its very strange to have 100+ runs and now it decides to take a dump.
To me, the irregular shape around the plug thread doesn't look normal as the combustion chamber has a smooth contoured shape.
I wouldn't expect to see that kind of pitting in the head and piston if all was OK.
Hopefully it won't be too long before I get mine set up.