Rings properly aligned at assembly?
Do you get "suction" on the intake stroke through the air intake?
You should be able to look up the exact valve timing in the manual but...
Stroke - At or near BDC the intake valve closes and the piston moves up. Both valves are closed.
Power Stroke - Near and just before TDC the fuel
is injected and ignites. The piston passes TDC and moves down. Both valves are closed.
Exhaust stroke - Near BDC the exhaust valve opens. The piston moves up and spent gas is expelled.
Intake stroke - Depending on the engine their may be an overlap where both the intake and exhaust valve are open near TDC. It has been explained to me that the moving "mass" of the spent exhaust helps evacuate the cylinder and draw the intake charge in monetarily.
So - if you valves have desigend overlap at the top of the exhaust stroke what you are seeing with the towel "could" be normal.
The correct tools to troubleshoot this - IMHO are...
- Differential compression tester. This puts a continuous charged of compresed air in the cylinder and differential compression in measured across two gauges with a fixed orifice.
- Piston position indicator - This is a guage that mounts on the injector hole with a pin that contacts the piston to measure TDC - then using a protractor on front pulley the valve opening angles can actually be measured.
Finally (back to simple) - I don't know how fast you are "hand turning" the front pulley but if not done with some gusto, any compressive charge will leak past the rings.
Without the proper tools I would rig up a battery
to the starter with a proper remote
starter swith (you can but at almost any auto store) and rotate the engine with the starter and feel the intake suction and exhaust ports