Finding the source of the CB125 compression issue

Well I knew I wouldn't be able to sleep a wink without knowing why the hell the CB125 motor won't hold compression. Seeing as how I can use all the beauty rest I can get (I am not a pretty man) I cracked into the motor as soon as I got home this afternoon.

It took about 20 minutes to get the motor off the bike, partly because I was slacking, and partly because I got distracted a bit. Once the motor was off, the hunt was on...

It took about another 20 minutes to get the motor apart because I completely forgot that I needed to remove the rear axle to pull the rotor again.

Axle / makeshift rotor puller removed.

5 minutes later this is how she looked.

Things seem good so fa-oh wait a minute...

One... Two... Shit.

Well I somehow missed that there are supposed to be dowels around three of the cylinder studs. Probably because that one was missing to begin with.
Do I think this is the cause of my problem? Probably not, at least not entirely. I'm gonna replace it though and see how that affects things before I start boring out cylinders and cutting valve seats.

Now here's the kicker... I don't really feel like waiting 2+ weeks to get a 10x14mm dowel from Honda, and I don't have to. However, solving this issue ASAP requires me to deal with this:

Freshly hosed off, this baby is about to get torn to pieces.

Don't get me wrong, I am TOTALLY appreciative that this bike is here for the picking (props again to Bill Becker for hooking me up with this bike.) Unfortunately, the motor is completely seized and there isn't a single thing on this bike that isn't rusty, muddy, bent out of shape or all of the above. Also the lack of a center stand should make things interesting.
Given my lack of frustration so far, it's all I can do to not hang the bike by a noose around it's head and chop the motor out with a sawsall and a mechanical laugh. Before that happens though, I'm going to float the bike in some PB Blaster and call it a night. Maybe tomorrow will hold some good luck for me.