Compression Loss

'51 L-head losing compression in cylinder 3 through the spark plug. I know this from spraying soapy water around the plugs. •Problem get worse as engine heats up. •New plugs didn't fix a thing.

Any suggestions on fixing this?

 

The threads look ok. The plug seems thread in normally. The seat isn't in bad shape. It's definitely showing it's age though.

 

You could try making a small thin gasket for the plug. Look for any cracks in the seat. If any you may try j b weld or some sort of metal sealant that can take heat and pressure. New head may be in your future.

 

Does the plug have it's gasket?

 

Put the head in a bridgeport and use the correct size end mill to clean up the spark plug seat. I've done that before and it works great.

 

Sounds like the seat has enough pitting that you can't get a seal.
Defiantly the right way to go, clean them all up while you are there and then put something in there to prevent the rust.
Of course, if you don't want to pull the head... You could try a small copper gasket in addition to the factory plug gasket. I also recently had some surprisingly good results from something I bought at O'Reily, right next to the muffler putty (which might just work as well), it was some sort of "high heat weld", spread a little on the plug and screw it in, cure at 100F for some hours (sounds like under the hood in the sun should work) . For something like $10 and a few minutes of your time it might be worth a shot, worst case is it makes the plug hard to remove from the head you were already going to have to take off.