To do a proper compression test, all the spark plugs should be removed so the engine spins over freely and you get an accurate reading on each cylinder. You should let it spin over at least 4 or 5 revolutions for each cylinder, or until the dial doesn't climb any higher. Once you do the compression check properly, having a low reading on two cylinder next to each other would usually be evidence of a bad head gasket.

Have you checked your coolant (look under the radiator cap when cold before starting the engine) for any oil? It would look like an oil slick floating on the top of the coolant in the upper radiator tank. Also have you noticed any coolant in the oil? You'd see it on the dip stick when you check the oil, It would show as brownish foamy bubbly crap on the stick. Make sure to run the engine a bit first because the coolant would be at the bottom of the oil pan after sitting awhile and might not show on the stick. The white smoke would support the 'coolant-in-the-oil' theory as well.

These indicators would point to a blown or misaligned head gasket or possibly a cracked or warped cylinder head or cracked block. Judging from what you said about the warped thermostat housing (this happens when one tries to tighten the bolts without seating the thermostat properly) and the apparent oil leak at the rear main seal, my guess would be an improperly installed head gasket due to a sloppy engine rebuild.

It's difficult to diagnose mechanical issues over the internet, but if you will do the aforementioned tests and report back, we will do our best to help.

Happy to help Ricardo. Perhaps you can return the favor one day since we both have '67 Galaxie 500s. I have two actually, both are fastback coupes. One is a running driving survivor with factory 289 2v, automatic, power steering and A/C. The other is a base model, but it's original 289 is beyond saving. You wouldn't happen to know where I can find a straight rust-free hood, would you?

Sounds like whoever 'rebuilt' your engine was less than competent by quite a stretch. You'd do well to check every nut & bolt before proceeding further with your diagnosis, you may have already corrected some issues just by tightening things up as you did.

One reason I suspected coolant in the oil was because you mentioned the smoke from your tailpipe was white. White smoke is generally caused be coolant getting into the cylinders. Oil would show as blue or gray smoke, and black smoke would indicate too much gas.

If it's white smoke and goes away after a few seconds, it's likely coolant leaking into the cylinders due to a small leak in the head gasket. If it doesn't go away and continues while driving it could be a badly blown head gasket, cracked/warped head, or cracked block.

If it's blue/gray smoke and goes away quickly, it's probably valve seals/guides leaking oil into the cylinders overnight. If it continues while driving it could be worn or broken rings, damaged cylinders, or a cracked block. If this is the case you should do both dry and wet compression tests.

If it's black smoke and goes away quickly, your carburetor may be leaking or flooding on start-up. If it continues while driving you have an overly rich fuel mixture which could be caused by the  jets being to big or other issues in the carb.

So you see a lot can be told by what color smoke it's blowing and for how long. Also I would take the diagnosis process one step at a time and don't start throwing parts at it based on hunches or guesses. That way you can better pinpoint the problem and maybe save some money too.