I pulled off the cylinder today, taking note of any evidence or lean conditions which could have caused the loss of compression. Turns out the head gasket sealed great, no discernible base gasket or case leaks. What did fail was the locating pin for the piston ring, which allowed the ring to get stuck in halfway around the piston groove, causing the loss of compression. It all happened so quick that the bottom end didn't get fouled with crap fortunately, because I shut it down once it started flapping. The skirts of the piston are all galled up from running crooked with the stuck ring, but that's okay, it's going in the garbage, lol.
The cast iron cylinder looks great and will just need a scotch briting since it didn't get scored at all by the aluminum piston. So all I need to order is a piston kit and some gaskets and it should run good again. Namura makes a pretty sweet piston kit with anti-friction coated skirts.
One thing I'm wondering is if I should keep the thicker copper head gasket I made, which made it run way sweeter on this crap Cali 91 gas than the OEM high comp gasket. It is possible that the ring-piston interface failed because the squish tolerance was too high which may have cause too high ring pressures. The crown of the piston looks great however, with no burning or pitting or anything, it was actually on the rich side. The engine made more power with the thicker copper gasket than with the stock thin aluminum head gasket, which must have been causing a borderline pre-det condition before, which obviously wasn't too bad or the piston would have been burnt. It ran a lot cooler with the thicker gasket too, the original setup out of the box got too hot in my opinion before lowering the comp.
I guess I'm going to have to consult with some two stroke experts with regards to acceptable squish tolerance on these motors, it could be possible that limiting the pressure pulse to the center of the piston crown prevents premature ring failure. This is a Chinese clone of the KTM with 16 hours on it however, so it could have simply been time for a new piston anyways. Putting a KTM50 on a heavy bobber bicycle with an an adult obviously puts more strain on the motor than a 100 lb gromit on a motocross bike on loose surfaces with tiny 10" wheels, so there are a lot of factors to consider here.
These motorized bicycles are my first experience with tuning two strokes, so the learning curve has been steep for sure. Any input you guys have about the top end on this thing is welcome.