It sounds IMO like it did overheat, how badly I don't know. The LA should be broken in slightly richer than normal operating settings. Too rich and the engine won't warm up enough to break in the engine right. You don't want sloppy rich like on a ringed engine. The fact that you needed to richen to get it to start also makes me think too lean. Does it still have the "tight spot" at the top of the compression stroke? Did it have good compression "feel" before first start?

Oily? I can't think of anywhere it might come from but the head seal at this moment.