Egad! You're problems are in the cam/valvetrain. Lord knows where the cam is installed and the rockers are most definately not adjusted correctly. You can't follow an old manual designed to instruct you how to adjust factory OEM rockers when you're using aftermarket parts that require the lash to be adjusted to a precise clearance. My guess is your mechanic just cranked the rocker nuts down to 20 ft/lbs. and this simply will not work with the aftermarket parts you have.
Egging out the pushrod holes will requre removing the heads, unless you want to risk getting shavings in the engine. If this isn't an option, I'd nix the 1.65 rockers and go with 1.5 rockers, and definately make sure you have the correct valve springs installed, and that they're installed at the correct height. The factory springs won't cut it, even with 1.5 rockers, and you've probably already killed them with the 1.65's. Check your pushrods, and replace as needed, because they're likely FUBAR. I won't get into a discussion on the valve guides or seals at this point, since you're on a tight budget. If it's not burning oil, don't worry about them just right now.
I can't add any more than screaminchief hasn't already.
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