Engine Mechanical problem
1997 Ford Escort 4 cyl Two Wheel Drive Automatic 122000 miles

I recently pulled a p0302 code(#2 cyl. misfire) and noticed a lot of smoke from the tailpipe and a possible misfire at initial start up. Plug had minor residue on it, but nothing seemingly serious. Replaced the valve stem seals under valve cover. In doing so, I found an air leak in cylinders #2 and# 3.A compression test yielded #1 and #4 at 160lbs. and #2 and #3 at 85lbs. Is this a head gasket or am I looking at a more serious internal engine problem?