Briggs 21 HP Single Cylinder. Bad rings?

Just got this Craftsman mower for free. Nothing is free.....
Engine: Model 331877, Type 1371 B1, Code 100405ZD
Started right up after I cleaned the totally fouled plug.
Burns oil blue smoke.
Has 60 psi compression.
But runs pretty well.
Just wanted to get a second opinion that there's no way this is a valve seal oil leak.
The cylinder looks great except for that stain (see photo) where I think some dirty oil sat for a couple years. It's a horizontal cylinder so that is where any fluid would pool. The stain feels as smooth as the rest of the cylinder.
Spark plug and intake valve all oil crusted. (see photo).
Would an intake valve have this much crusted on on the top side of the valve if it was an oil leak through the rings?
I don't see oil leaking down the valve stem.
Also it blows a lot out of the dip stick hole.
Exhaust valve stem is flat black and dry. (That photo won't load)
 
Ok, it's obviously bad rings, but I'm still open to somebody else saying Duh!
 
If I replace the rings, do I need to clean up that stain even if you can't feel it there?
 
Thanks
:)

Thanks for the info.

Are you referring to the two solid pins, showing in the top of my block?  Their just alignment pins.
 
Re honing, yes, I would give it a light hone for the new rings to seat.  
 
As for ring wear, put both the compression rings in the cylinder (about 1" down from the top)
and measure the end gap...
 
 
From another thread:
Service doesn't have minimum end gap but .010" should be a target as .030" is the maximum allowed.
 
 
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This is the hone I have and used (for literally decades).  For 2" bores to 7" bores.
There is no "grade" of the stone listed.  You may be able to borrow one from your local 
auto parts store...
https://www.summitracing.com/int/parts/shc-94633/overview 
 
 
Can you open a free acct at Post image: https://postimages.org/login  
Upload your pic, then copy and paste the link for FORUMS.
A pic of your "pin" may help find where it goes...
 
That and some more detail, how the engine was positioned when this pin came out.
 
Admin may take a couple of days to allow it to post (for new folks).
 
 
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Any updates?
 
 
 
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UPS lost the cutting fluid I ordered for honing the cylinder. I finally got started today. Honing went really quick, in like 25s it was crosshatched. It brought out some wear marks I couldn't see before. Took half the day to clean off the gaskets and clean the engine block etc. So what do you use to clean carbon off the valves? Other than that it should go back together tomorrow.

Won't the wire brush damage the valve mating surface? What about the combustion chamber, can the valve seat handle the wire brush?

Another delay. The valve seal I got in the gasket package just falls into place. No resistance. Now I'll have to order another seal and wait :(.

Hey, I'm getting mixed answers for how to orient the piston rings. These are inside beveled rings. Both look identical. Right now I'm seeing videos that say bevel goes up on the first ring and down on the second ring. The guys I bought them from say both go up. First they said both go down.  Can you tell me what the real truth is?
 
Also angles between gaps, seems like there's more than one opinion on that.
 
thanks
 

There were cryptic directions with the rings. Not very clear. And after getting two answers from them I don't know what to trust.