The coolant loss may be a dead give away for a failing head gasket. If you can't explain the loss any other way, (leakage, etc), then that would be my bet. In which case your low compression, etc would be due to the leakage from the head gasket. Does your cooling system show any signs of excessive pressure buildup? Did you try shooting a little oil into the bad cylinder. If you did and there was no change, then you're problem is the head gasket. At least I hope so for your sake.

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Jeff L
1987 300e
1989 300e
1987 BMW 325