Turns out the engine, made by Robin America, Inc. (Subaru) for Onan/Cummins has a known design flaw. The attached technical service bulletin (TSB) describes the problem, and the solution - a redesigned cylinder head that has an integrated clip to hold the exhaust valve guide in place.
My engine falls squarely within the units built with this design issue - SN's and build dates all confirm. Even Cummins confirms this. Yet, because the unit is 8 years old (with 250 hours of total run time), it is my responsibility to have both heads replaced - at my cost.
I bought a new head ($320) for the failed cylinder (#1), new rocker arm, and new gaskets. After installing them, the thing purrs like a kitten. Still, I have to wonder how long before cylinder #2 gives up the ghost.
In my business, if I put out a product with a known defect, and customers start calling, we fix it - regardless of the age. It's the right thing to do, and it's what helps build a reputation for taking care of the customers. It's expensive, but sometimes there's no better way to demonstrate customer loyalty than having a problem and shining with stellar service.
Cummins argued that the cylinder head design was an 'improvement', and that they could not be held responsible for upgrading years-old units with the latest improvements. I can see that point of view, but IMO, redesigning a part that is known to slip, known to cause failure, known to cause damage is not simply improving a product. It's fixing a fatal flaw.
Oh well. Two beers for me... one for fixing it myself (I've never taken an engine apart before), and another for not coming unhinged over some lousy customer support.
For the record, if given a choice/alternative, I will not support Cummins/Onan products again.