Head gasket leaking...

If you have a basic 2 stroke engine it would be good to lap the head to true it, you sand it on fine sandpaper on a true flat surface like a pane of glass. Tape a sheet of wet or dry sandpaper to the glass, wet it and sand the head surface in a circular motion keeping the head flat. This will remove the improfections and give a better seal. The link below has pictures of this.

http://motorbicycling.com/showthread.php?t=29750

By the way welcome to the forum, the link that I posted I found by using the Google custom search box near the top of this page. Its a good way to research a problem, I and many others use it every time we need answers to help other or ourselves.

These are aluminum Heads and cylinders. Just to let you know I worked on motorcycles for 25 years. Aluminum heads need to be re tightened to specs. Often and should be done with the engine is cold not hot. Also the biggest cause of blown headgaskets that have been torqued properly is not letting the engine warm up a little before takeing off rideing. They also will blow the base gaskets unless you give the aluminum time to expand and tighten on the gaskets. Hope this information helps after you replace the head gasket and either true the head or replace the head they are very inexpensive. You might also check the trueness of the cylinder.

I always lap the head and the top of the jug before assembly, you'd be amazed at the imperfections that will show up just into the process. In addition to those surfaces I also use my lapping slab to make sure the intake and exhaust port surfaces are also flat.

biggest cause of head leaks is the acorn nuts holding it down - often, they bind inside the acorn because they're too short - pack washers under them or break off the cap part, or just get regular nuts - any of these will fix it