Troy-Bilt TB 42

Yes oil and air would come out the push rod galley. It would ring blow-by which all engines have. Now the percentage of this leakage is what important. Most OEM spec no more than 20% but I have work on some that this is as high 40%.
 
The question is why you got zero compression. Have you verified that the piston is moving up and down in the cylinder? As you should gotten something; unless, the piston rod is broken. Compression should be in the range of 55 - 80 PSI (3.8 - 5.5 Bar) for the P90. Now it does take a compression design for small engines as automotive gauges may have too strong of a check valve (scharder valve) to allow proper compression readings.
 
Btw the head gasket does shows that it appeared to have been leaking so check the head for warpage. No more than .003" is allowed on most engines with all metal head gaskets. The cylinder does appear quite worn too as I see a shiny area and no honing crosshatch pattern. Service limit is 90.25mm (normal diameter is 90.01-90.02mm) so this a max wear of .009" for the cylinder with zero taper and .008" out round. No oversize piston and rings sets are available for this so it would not be rebuildable if worn out. This what you get with a Chinese built engine.
 
I have only a handful of this engines in the shop. One with snapped rod and one with seized engine mounting bolts, the rest were just carburetor problems.

I was able to measure the cylinder diameter. It was well less than the service limit of 90.25 mm. I think next I'll pull out the piston and check the rings.