All I can think of (and I'm not a huge expert) is that it's down on compression ratio -- not compression seal. Particularly if you got it used, take the head off and see if it has multiple head gaskets stacked up in there. If there are -- take some out, and try again. Someone may have been confused, or flying with tons-o-nitro, or both. While the head's off, make sure that the liner is in correctly, both seated correctly on the case, and oriented correctly (as the piston goes down it should uncover the exhaust port first, then the transfer port). Piston, too -- the baffle should be away from the exhaust side (I think).
I assume you're using a hot glow plug -- using a cold plug shouldn't cause that severe a problem, though.
That's it, I know no more, unless it's a primary compression (crankcase) leak.