Well I was told that this new engine was a "runner", but after pulling the valve cover I can see it was not a good runner. One of the valve adjuster jam nuts came loose and this is what the clearance looks like:
Damage report: one of the valve keepers has partially popped out and is cracked. The top of the valve is destroyed. The rocker arm face is also destroyed.
hopefully there are enough good parts from both engines to build one good one.