Alright, lets have a conversation. Those photos raise more questions (in my mind) than they answer. But I did see a couple clues worth investigating further.... more on those later...
I just read through three chapters (Head/Valve, Cylinder/Piston, Lubrication) of the service manual familiarizing myself with the motor, so I could talk about this. Again raising more questions than answers, since I haven't gotten enough information yet to point any fingers at anything and say "there... thats the problem". :-(
So I'm just gonna bounce stuff off ya and see what sticks and what comes back... and end with a recommendation.
A possible (or most likely) explanation for why the motor seized up while cranking it during a compression test is, because you may not have had it at TDC on the compression stroke when you took the valve cover off, then put it back on for the compression test? The cam or decompressor plunger or something may have moved up out of place slightly when the cover came off, causing a bind when you tightened the cover back up and cranked it over. My money is on the plunger popping out, but from here everything I say is speculation cause I can't look at any of the motor parts. The TDC procedure for valve cover removal is covered in chapter 8:
Now, what about that upper connecting rod discoloration? It looks like the wrist pin (either this new wrist pin or the old one, can't see this new one well enough in the photo) and the upper end of the rod has gotten pretty darn HOT at one time! It is discolored for what looks like about 1.25 inches or more down the rod beam, and the entire pin area is burned. Is that new wrist pin discolored from heat too? That don't look good... but the bottom of the rod looks like it hasn't overheated. I can't tell from the photos whether its been getting enough oil or not...
Answering your question about the side movement of the piston on the wrist pin... that is normal at the top of the rod. Thrust movement of the rod is controlled at the bottom of the rod where it connects to the crank throw. Any excessive slop at the bottom is a big problem, but not at the top. The bore holds the piston centered over the rod, not the rod itself.
Is the oil ring a one-piece ring or a three piece ring, that you assembled? If you assembled it, are the scraper rails fit into the expander right, rather than one of them put in alongside the expander? Is the oil ring free to move in the piston land or is it stuck? Does it seem to fit snugly in the bore? I have several more questions about that oil ring that can't be answered through a forum, so I'll leave it up to you to insure that it is good and that it is installed right and that it fits and that it works...
You mentioned the ring gaps being lined up in one of the photos... don't worry about that while the piston is out of the cylinder... The cylinder itself doesn't look very good to me. I see wear at the top of the bore and other clues that indicate to me that it should be mic'ed and if not in spec, bored to the next oversize as appropriate.
Now for some general commentary... The photos don't give me enough information... in some of the photos the cam lobes look a bit ugly, but in others not bad at all. Same goes for the rockers... didn't learn anything from them. Cam journals and the head look alright so its your call... was it getting enough oil up on top? Are the cam and rockers still good?
Also, in some photos I see fine black particles in the oil film on the parts. It looks like it could be grit from parts rapidly wearing and burning up from lack of oil, or it could be from old motor oil that was left in there for a few years too many... Your call.
I come away from all those photos with one nagging question... that seemed to be a common theme in most of those pics. It looks to me like there is a lot of grit in that motor. What that grit is composed of, or the source(s) of, I have no clue from here. Some of it is fine enough to be leaving stains... while some are particles. It looks like stuff is getting chewed up pretty quickly.
I'm not there to put eyeballs on it all and figure out what is going on... I know nothing about its history (and neither do you), so my best recommendation has to be this:
Pull the motor out of the frame and split the cases. Clean every part up in solvent so you can inspect it and proceed to make a list of things that need to be replaced/fixed/refurbed. Disassemble the head too, it probably needs valve seals at a minimum... Read the service manual until you understand it all, then put it all back together clean and right with appropriate lubes and sealants.
Hang in there...