The usual damage from hydraulic lock is a bent connecting rod. This can be detected by turning the engine over with the glow plug removed. The engine will have a stiff spot when it's turned over. If you disassemble the engine, the crank will turn over smoothly, and you can move the piston up and down in the liner smoothly when it's out of the engine. It will have a stiffness when it's assembled.

It's almost impossible to damage the cylinder head gasket if the engine's assembled properly. Hydraulic lock won't do anything to it. You damage the gasket by improper handling when it's outside of the engine, or by an unevenly-tightened head. You can also damage it by an overheat, which would cause the head bolts to go loose and you then get blowby when the engine's running.

The most common problem with helis is fuel foaming...air agitated into the fuel tank by vibration. This causes the engine to go lean. The change in RPM can change the vibration mode, and the foaming can go away. This then causes the engine to surge.

Bench running will allow you to determine if the engine does have a problem, or if it's a result of the engine/airframe combination. Usually, it's the latter.