I did a second compression test with the engine at operating temp and found #1 cylinder40 psi low. I pulled the head and found #1 exhaust valve had worn into the head about an 1/8" causing my dilemma. My machine shop guy, Lou, is installing new valves and seats on all the exhaust valves and doing a valve job on intakes. , Finally, problem solved!
Also, I found two lifters on seperate cylinders that appear to be bad - they have no spring tension on the last 3/8" or so of travel - I was wondering if anyone esle has encounted this. I'm replacing all the lifters anyway due to concern that this is no good.

p.s. - what exactly does the dpfe sensor do?