That looks pretty much like both my machines. The pushrod tunnels seem to be the culprits. Unless you have a mechanical reason to pull the head (like that new alloy barrel and forged piston) or you're seeing oil dripping out I'd go with "Wipe 'n ride". Oil's cheap and a bit of "Protective mung 'n drool" keeps the rust off, eh? ;DThat might have been me with the O rings - I have done a few like that. You have to be careful because the O rings don't always want to be concentric to the tunnels in the barrel, as the tunnels in the head may be slightly out of step with them and a compromise may be needed. As for the oil leak this thread is about, perhaps tightening the head nuts might sort it ;)
Somewhere, maybe here, I saw where a clever bloke had used his drill press and a hole saw to make recesses around the pushrod tunnels. I believe he did this on the cylinder. He than used a couple maybe 1" O-rings to put paid to his weep. He also dispensed with the head gasket by lapping the cylinder spigot to the head, then using a bit of "Indian Head Gasket Shellac" to guarantee combustion chamber sealing. I know the clever folks on here that push the limits a bit are fully up to speed on this process. It was SOP on my old rotary valve Can-Am desert racer.
If its not all over your pants , its fine.
What CyrusB said. Also, if it really bugs you, our "Bullet Whisperer" Paul Henshaw, showed a clever little "bodge" one can do, particularly if one KNOWS one has a plain copper head gasket here: https://youtu.be/SPvT4HAgokM.This can work fine on solid copper head gaskets, especially the thicker ones, which naturally have more material which can be moved slightly in this manner. As long as the gasket isn't letting any compression past, this can be a long term fix, but it will not work on composite or sandwich type copper gaskets.
I'm not exactly sure if this tip may be advisable for composite or other sorts of gaskets used in Bullets, but I'll let Paul comment as he wishes. Suffice it to say that with a rugged solid copper one it seems to work a charm, and frankly, with some experience of composite vs. good solid copper head gaskets with my Nortons, I'd go reusable/re-annealable copper every damned time.
Glad to see this post is back. I'd like to add that the small stud by the spark plug must communicate with the crankcase. (does it?). Because after its all warmed up and idling, I see it blowing little oil bubbles. Cute little 1/4 inch diameter bubbles, like 1 a minute. Still, really no mess.Sometimes, these studs break through into the breather outlet from the crankcase.