Engine Cutting Out! What to check?

If there was a hole in pistons, your compression would be a lot lower than it is. I agree that you're seeing some break in material and smoke coming out.

If you have access to a bore scope/camera, you could take a peek inside the cylinders and see for yourself what it looks like.

My best guess is that the rings are not seated yet, and you're getting a loss of compression there.

Start by changing the oil and running some standard oil in it. Not synthetic. That will cause the rings to not seat properly because it's too slick, and they won't bite on the cylinder walls to seal.

The next thing I would do would be to back the timing down and add some octane to the fuel. You need to stop the detonation before it DOES damage things internally.

How do your plugs look? Can you take a good clear close up pic of a couple of them for us to take a look at?