The overheating on one side was tracked down to a little valve thing bit that opened when the decompressor was operated that dropped a drop of oil into the inlet manifold. The 35 year old rubber had gone hard and as a result it was continuously dribbling sump oil into the intake and over fuelling the engine which I've learned is a very very bad thing for a diesel engine. It was a simple fix that took 10 mins but I think the damage had already been done by this point. This would also explain why it was so hyper sensitive to crank breathing / pressure and I had resorted to having a rag stretched over the oil filler to stop it smoking badly. After this fix the cylinder head temperature dropped and both were between 120°C and 145°c depending on the conditions and it even sounded like it was running a lot better, it was certainly more responsive.
Prior to the last and final fail I had got it working very well. It was starting straight off the button and running well and for a brief moment I had it at the staggering speed of a mile a minute. The last outing was in idyllic late afternoon summer sun and warmth through some country roads and then over the old Severn bridge to Bristol which including a few stops to check temperatures took about an hour. I thoroughly enjoyed it and the bike was running well and was everything I dreamt it would be.
The engine then died again when I tried to start it to return home. No compression which could have been something simple but as I couldn't start it the recovery bloke came and took me home. When I took the head and barrel off of it the piston skirt was cracked. However further investigation reviled a warped and badly distorted cylinder head which had ultimately resulted in the piston contacting the head and causing the cracked skirt. I never got to the bottom of why the valve clearances keeped closing up but a softened head that was distorting would explain it. I suspect the ally head was over heated before I got the engine or during one of the more unsuccessful outings.
Spares are hard to get and very very expensive. So that's the end of the line for that particular engine and indeed the whole project.
I've now given up hope on the whole engine as a badun.
RIP the V Twin Diesel Project.