Then squirted engine oil into left cylinder and retested. It went up to 160 psi.
It is well known LORE to squirt oil into a cylinder to do a "dry" and "wet" compression test.
Sadly it is a waste of time on a horizontal cylinder, almost up there with the gentleman who was trying to convince me that I should fit valve stem seals to an airhead.
Given the cost of a set of rings (and if you are lucky enough to have a steel barrel - its even cheaper if you buy R75/7 rings) and the low price of a quick hone and given that you are taking the heads and barrels off anyway I'd give the old girl a birthday. Have the valve guide clearances checked (and if they are out of spec have them K-lined, only fit new guides as a last resort) Chuck in a new set of exhaust valves (your 50,000km "clock" resets to zero then - and if you don't know what I've talking about have a look at the piston in my photos that show the result of the head falling off an exhaust valve), re-cut all seats, check the rocker lash pads for wear and if worn have them built up and hard chromed. You top end is now good for 50,000km when you throw the exhaust valves away again, your rockers good for just about forever and your rings for 75,000 to 100,000.
Given that you do not have chapter and verse on your bike's history, the above puts you in a really good and comfortable position of assured reliability. Whilst you have the top end of the engine, do the splines and have a quick look at the clutch - changing the clutch plate is 20 minutes extra work over just doing the splines. Whilst you are in the neighbourhood, $25 for a new main seal and $50 for the tool to fit it properly is a 1/2 good idea too.
If you do take the flywheel off (because there is oil leaking out behind it, please remember to cut an allen key down and insert it into the alternator end of the crank and put the front cover back on - the idea is to stop your crankshaft from moving forward and causing the thrust bearing to come off its dowels - trust me on this, that is BAD.
Seeing as the gearbox is out at this stage, new seals (all of $10) are a no brainer, don't forget you need new drive flange bolts WITHOUT washers. Take care removing the drive flange and do not even think about using a two jaw or four jaw puller directly on the flange, drill a round piece of scrap, bolt it to the flange and then use the puller, keep the bit of scrap and loan it to your friends when they do theirs.
Finally, seeing as the bike isn't going anywhere just at the moment, pull the final drive off and replace its seal too. I remove them by drilling 4 holes in it and inserting self tapping screws, I then use a prybar on the screws to pull the seal out. There is a special tool for seating the new seal, I use a brass drift and go steady until the seal is clearly seated on its full circumference.
That's it, a full birthday and many, many trouble free kilometers in front of you. Cost of bits is less than $150 (assuming you buy a clutch plate) and will take a weekend providing you buy all the bits in advance.