yep, piston is hitting the head.
I would thing someone decked the head or cylinder abit too much.
Can this be why it was eating up plugs?
Oh yeah. How far is the piston sticking out of the cylinder or did you do a squish test?
Haven't had a chance do do squish test haven't had bike around. ( it's at my parents)
I would say that is the first thing you need to check. The head to piston clearence. I know a few guys have said to do it. You really need to see how far the piston is hanging out of the cylinder and than run a squish test.
Bring piston almost up to TDC and get a piece of solder an place it across the top of the piston. From transfer port to the opposite transfer port. Install head with gasket or no gasket if you are running an o ringed head. Tighten head down and rotate the piston up and past TDC. Remove head and post picture of solder and measurements of solder closest to the bores edge and where its no longer smashed which would be toward the dome of the piston.
Also post a picture of the piston at top dead center.
What base gasket thickness are you running?
I am wondering if it was a trinity cool head. They were known for there turbo cut domes but also known for cutting the dome not with any divergence in the dome but with a convergence into the squish band.
I work 5 days a week. and bike is not in my backyard or else id love to do all the suggestions i am planning on picking up the bike tomorrow if not the day after so i can report to you guys, take pictures, then hear next suggestion. Had a bad day today:( Oh yea and battery went out on my truck too F MEEEEE
just take head off of bike then cycle motor over and watch to see if piston rises above cylinder, if not
you will need a new head, someone just took way to much off of that one, not sure if you can double
up on the gasket tho, but 250 heads are cheap
DO NOT RUN THE MOTOR LIKE THIS!
I think I know what happened.
I'd bet the guy who o-ringed the head took off the original head gasket then o-ringed the head and stuck it back on without checking anything much less cutting the squish, dome, adjusting the deck height.
Take it to Jerry he should be able to fix it pretty easy.
It might be faster and cheaper to just bring him the head, jug, & piston but check with him first.
So I dropped off my bike with jerry. It might end up being up to 2200. I paid 1600 for the bike I might just part it out. He's going to open up the bottom end and let me know the good or bad news.

or
your bike is in great hands. when you get it back
it will be better than new.
I know it is but im at a crossroads listen to my wife or not lol . Jerry is an awesome guy and knows his stuff very intelligent and easy to talk to definitely would recommend to anyone. Weather you are seasoned in motors or not he will explain everything in layman's terms and more advanced terms depending on your knowledge.