N62 Extreme Cylinder Wall Damage - Causes?

[BimmerBreaker]

Hello,

I am writing here as this seems to be one of the more knowledgeable forums regarding the N62 engine. This is not in my E53, but is an N62 none the less... specifically a 4.4 originally installed in an E60 manual and now at home in a Z3 roadster.

I have had the car running over 2 years now and the car still runs very well. No misfires, passes compression tests although leakdown tests do indicate something is off.
The only issue is inconsistent smoking out of the tailpipe and spark plugs on 7, and to a lesser extent 8, were always oily. I did the valve stem seals when I had the engine out on a stand, re-did them later on 7 & 8 just to be sure, I replaced the CCV diaphragms then when that didn't change anything I bypassed the CCV system completely with a catch can vented to atmosphere just for diagnostic purposes. None had any effect.

I looked inside the engine with a borescope yesterday, and this is what I found:

Cylinder 8



Cylinder 7





I did not have a borescope when I originally rebuilt the engine so there is a chance it was like this before I ever installed it. I am going to be replacing it with a 4.8, but am curious if anyone here has a solid idea on what could cause these issues as I would like to do what I can to prevent it in the future.

My main thoughts are the previous owner overheated it (it never overheated in my ownership) or there was, or is, a leaking injector on 7 washing the walls out. I won't be able to dig too deep into it for a little bit but this failure is new to me and I am curious what others think.

Thanks for any input