Mark,
Those compression readings don't sound that far out of line for a used, low-compression-ratio engine. The readings look relatively even. I prefer using a leak down tester to check for burnt valves, I've never had any success with the paper-on-the-tailpipe test.
Have you checked to make sure the timing mark on the balancer is in the correct location? You would need a TDC tool of some sort to stick in the #1 spark plug hole. I have made one out of an old spark plug and a bolt: remove the porcelain out of the spark plug, thread the inside and use a long bolt (with threads up to the head) to thread into it.
With all of spark plugs out, turn the crank so the timing mark is at either 3:00 or 9:00. Insert the TDC tool into #1, with the bolt protruding out of the spark plug about an inch. Slowly rotate the crank toward TDC, it should stop somewhere before TDC. If it doesn't, turn the crank back to 3:00/9:00, thread the bolt further into the cylinder, and start again. When the crank stops, mark the balancer with a crayon or the like (I like to use one of those white-out correction pens) at TDC on the timing tab.
Rotate the crank in the opposite direction all the way around until it stops again (try not to slam the piston against the bolt!). Mark the balancer at this position. Exactly in the center of the two marks on the balancer is TDC. If that does not correspond with the OE mark on the balancer, mark this position and use it as your timing mark.
Chuck