I'm sitting here wondering if you removed the remaining cam stands (towers?) and confirmed that all the valves were closed when you did the test. Keep in mind that the remaining good cam can keep some valves open. I guess you summed it up when you stated:
I could also hear air coming out from down where the timing chain is.
This is not good news considering, as far as I can tell from the pic, that the valves on #1 are closed.
Now it's off with the head
How many miles are on the engine?