Are you checking this by measuring how much the crank pulley moves, then you are at or exceeding the service limit of the chain wear. If so, I would have to wonder if the chain has jumped time. Cracks between intake and exhaust to the degree you see is not common; the cam timing being off would be a more likely cause. I would be checking to see if the #1 valves the are right with the #1 cylinder at TDC. Compression may be all screwed up if it is. (But at least it should be all hosed up across all cylinders.)
Also, a stuck valve would cause your symptoms; any sign of that when you were setting the valves?
Running well for a mile or 2 seems to imply the flooding is the issue (or a sticking valve), rather than any cam timing problems.
Be aware that high psi on a leak-down test can move a piston suddenly and the fan belts and blade too... so keep yourself clear of moving parts in this test.