So, what went wrong? I don't know. The head and block were both checked and looked perfect. But I did find that 3 bolt holes (in the block) had a substantial amount of oil in them. My guess is the Cometic gasket (stainless steel / composite) allowed oil to weep between the head and block.
I spent about 7 hours cleaning the the block and front housing. An exercise I do not want to repeat...
Here we are today: