Solved the leak - sort of. I improvised a gasket from a beer can, but i need to get a decent one, or - better yet - one made from paper, like the ones used in big carbs, because it still leaks a bit with the two gaskets (both were needed).
I had to remove the lip from the head (seen on the attached pics) with my dremel.
Measured geometric compression: 12.6:1
See the youtube video for more info.
I will try 0% nitro this weekend, as I'm waiting for a fresh batch of fuel (82% methanol, 18% castor).
http://www.youtube.com/watch?v=imxKsiBj-Cg