What does this mean

[Ponderosa]

I have a 40hp ETL yamaha three cly that has multiple problems. Before I commence on the electricial I took the compression after replacing head gasket and cleaning water passage's the best i could since it came from salt water. Previously it appeared like it was locked up however after using a wrench and turning clockwise and counter clock wise it did free up but seem to be sort of draging or hard turning. I took to the marvel mystey oil in the spark plugs and also squirted into the carubs. I had turn it over on multiple ocassions and the motor seem to be turning freely. Over a period of 10 days and several applications of this procedure the motor seem to be spining freely.
Today I decided to take the compression the first reading was as follows (1) 90 (2) 120 (3) 95, I then took the compression using the m mystey oil and got (1) 95 (2) 120
(3) 120 I then spined the motor several times to expel the oil that may have been left in the cly and received (1) 75 (2) 120 (3) 112
My question what is going on with cly # 1 ?
Is this enjine capable of running moderately for some time?
What will fail if I do run it?
Give me advice?
I do not want to put a lot of money into the electrical system and have the motor to blow up the first time i use it.
Please help with (if it was mine I would do
I have no dealers withing 200 mi or so.
Motor will never be run hard or fast.

[rodbolt17]

looks like its already blown.
remove the head and carefully inspect the cyl walls.

[Ponderosa]

For RODBOLT

Thanks did that the cly walls looks amazing good Any other advist?

[robert graham]

It's good the cylinder walls are smooth. Maybe piston rings are stuck in their grooves. If you can get the motor to run and do a decarb proceedure with Ringfree or Seafoam, might loosen up and run O.K. Are your carbs clean? Hopefully you don't have pitting/corrosion problems in the crankshaft shaft, rod bearings, etc., Good Luck!