Frank,
If you remove the plug and turn the engine over is it just a pinch near the top to the stroke? If yes it is most likely varnish build up as others have stated. To remove the varnish you can pull the head (which I think you have done) and take a small strip of Green Scotch crub pad and using you finger rub it around and up and down with a twisting motion in the upper half of the cylinder. Go slow, you will get a feel for it, after a few strokes clean it out with a paper towel and some solvent (fuel, thinner will work) and see if it still has a strong pinch. You want to leave it with just a touch of pinch, then run some 50/50 25% oil, 5% fuel through it rich for a couple tanks. That will clean it out and you should be good to go. The Fox likes high castor fuels I believe RMS has some 5% high castor fuel for the Fox that has 3% syn and 25% castor that will work fine.
When you put the head back on the crankcase use the Fox Philips head screws, the head just fits the relief in the head, you can try the socket heads but my experience has been that they bind against the head and cause binding. Use a cross triangle tightening start at either the front or back and do the triangle first then go to the second triangle, this pulls the head down even. Bring the screw to finger tight then go 1/8 turn on each as you pull it down. After each full round of tightening check that it still turns over smooth will the same amount of pinch at the top. If it binds hard, loosen the bolts, remove the head and run a # 30 drill through all the bolt holes, clean off the aluminum chips and start the tightening again. Some of the heads have the holes just a touch off and as they tighten it binds and distorts the head, drilling them out give it the extra room and usually cures the bind. Also check for smoothness as you put tighten the back plate, if it binds drill them out with a #29. Last thing is to use either straight maple motor mounts or if you use aluminum pads on you mounts put 1/64" curse pads under the mount lugs, again as you tighten down and as you put the muffler on check for binding with the plug out. The mount holes need to be free and not forced to fit as they will also twist the case and cause a bind.
Best, DennisT