James,
Have a real close look at the bottom seal because some time I have been caught with them. If you end up having to take the cylinder I would be checking by putting fuel in the crankcase to see if you get bubbles (this shows a leak).
From your reply before I am assuming that the rings are either worn or the cylinder is scored. You can also check this by looking in the exhaust port after taking the muffler off.
Let me know what you find.
