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People will give you different suggestions on lubrication. Personally, I use white lithium grease. It's generally inert, spreads heat well, but is difficult to find. I think Canadian Tires carry them, but their stocks are... iffy.
When you're doing your compression test, how hard are you thrusting? You need to thrust quickly and straight down, not along the sides. That way your piston o-ring will expand and hit the sides, hopefully creating a seal. As well, is your cylinder ported, because that is something to consider for better compression (in theory) depending on your barrel length.
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