Did the engine rotate freely? If not, the valves are obviously bent. If you do not have access to a leak-down tester, remove the head and spray a bit of carb cleaner in the intake and exhaust ports. Take a look at the valve side of the head... a small (and I mean small) amount of fluid getting past the valve is normal, anything more means bent valves (It's usually the exhaust valves that get whacked). I'm currently working on a '98 that suffered a rear tensioner failure. So although the fronts are most likely to go... the rears do go as well.

 

The E34 is dead sadly, but I'm keeping the engine (Aluminium 3.0 V8 4 cams 32 valves) diff and many goodies for future projects.
I'm checking out the forced induction section once in a while but don't post much there these days. My girlfriend cousin (gnarfy) has a E36 M3 turbocharged that I drove this summer, that's the most powerful car I drove to this time, first gear is useless, second is good with care and you can floor it on 3rd on the straights

For your cylinder head, I figure that while you are in there, cam timing all messed up, taking off the chain and taking the head off is a minor job compared to get there, you will see the dent in the piston and you will be able to check if it scruff the cylinder, hairline cracks. New valves, guides some seat refresh, lapping compound from a good engine shop will make you sleep better at night and make this thing last forever.