okay...here's a sorta answer to the two responses
On day we were going to tear into this, another friend came over (previous mechanic at CA BMW dealership) and between the two of them decided that they weren't exactly sure what the problem was and that I'd better take it in.
Indy removes, takes to local rebuild shop who says they can't rebuild because (paraphrasing) a valve got into the piston and "screwed the goose". That is a terrible second-hand translation of what they really said but works for now.
Bottom line is bad compressor and now looking for hopefully inexpensive replacement. Speaking of which reminds me to call Phil real quick and see what he says!
Anyway, the saga is ongoing and I will update as things move along.
Thanks again for the input! Mike