Working on engine start up after rebuild (2056) and maybe have 10 minutes run time. (No load still on jack stands) Noticed that something was out not much compression through cylinder #2. Shut it down no bad sounds or smoke everthing turns over smoth. compresson test # 1 120 # 2 65 # 3 118 # 4 120 Can the valve settings be so far off to get low compression? What should I try ??

Yes improper valve adjustment can cause improper compression. Don't burn a valve.....

A silly question, are the piston rings for #2 staggered?

adjust the valves cold and retest...

it could be possible to break a ring during install ?

Check valves first.
If that does not bring it up, do a leakdown test and listen to where the air is escaping.

Zach

Well good news no burnt valves but valve train was a mess !! All fixable ! 2 studs nuts were in valve cover 2 were striped out but not in head the hold down blocks. Removed all (8) studs and replaces with new HD larger studs they came with cam kit. I think the problem valves toooo tight and new HD valve springs? Has anyone had this problem?