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Do a leak down test - or "just" stick some (low pressure) compressed air on each cylinder via the glow plug holes and listen at the following points to get a better impression of engine condition:-
1) Air inlet - valve problem
2) Exhaust - valve problem
3) Bubbles in coolant - head gasket (unlikely to see it though)
4) Oil filler cap - could be piston rings or leaky valve stem seals
5) Dip stick tube - piston rings (compare with #4)
Perform each test with the valves closed!
If you are in any doubt about valves being open or closed - remove the rocker arms.
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