Rough idle - cyl 5 misfire - burnt valves?

[White99]

This is my saga. I have a '99 with the 5.7L engine, completely stock, with about 150,000 miles.

About a month ago I started getting rough cold idle, it quickly got worse and it would start missing as I accelerated, especially at highway speed (onramps, going up hills, passing someone, etc).

I immediately suspected an oxygen sensor, but didn't know which one. I went to Autozone and they pulled the codes for me: Cyl 5 misfire and Oxygen Sensor Bank 1, Fwd. So I changed the Oxygen Sensor on the driver side ahead of the catalytic converter and I did a tune up (plugs, wires, cap and rotor). This fixed the problem with the engine missing at highway speed, but I still had rough cold idle. I then cleaned and recharged my K&N air filter, cleaned the mass flow sensor, and at my wife's insistance I ran fuel injector cleaner through it (1 tank with GumOut and 2 tanks with Seafoam).

Over the last couple weeks the idle problem has gotten much worse, so I took the vehicle to a reputable local shop and asked them to diagnose the problem. They ran the computer diagnositic and which once again showed cyl 5 misfire and the oxygen sensor. The shop manager asked me what brand of oxygen sensor I had used (Bosch) and suggested that I replace it with AC Delco and check to make sure the sensor is getting power. The computer analysis showed the misfires at low RPM, but they clear up at 1200 - 1500 RPM.

Next they tried to diagnose the Cyl 5 misfire. They found that the porcelin on the plug was blistered and it was already showing build up from burning oil. They told me that the blistered plug is a sign that the cylinder is running hot and likely running lean, but they checked fuel flow and it was normal (seems to eliminate a fuel injector problem). They checked compression and found it to be 20 - 30% low (120 vs 150) when the engine is warm, but it is OK when it is cold. They did a cylinder lead down test to try and figure out if it was a burnt valve or the rings were blowing by. Their opinion is that both the intake and exhaust valves are burnt and they estimated $1500 - $1700 to do a valve job. They also installed a new spark plug in #5 with something on it to keep it from fouling. When I drove the truck home from the shop it ran worse than ever.

My questions:
- If the compression is good when the engine is cold, why would it have rough cold idle?
- why is it burning oil? Does the oil run down the valve stem and leak past the bad valve?
-What is your opinion about Bosch vs AC Delco oxygen sensors? Is check the voltage as simple as putting a volt meter on the connector?
-what could be the root cause of the burnt valves?
-to save money I am going to do as much work myself as possible, but I'm no professional, what is reasonable for someone with medium skill level to do?

Any input would be appreciated!!!