I wanted to repost a conclusion to these issues. I FINALLY bought and installed a head over the weekend. Keith Calver really helped me out and was a treat to work with. Being in the US isnt always easy when it comes to these cars but he was great. The head finally arrived and I spent the better part of Saturday (much to the annoyance of my wife who wanted to do work around the house) trying to get a massively stuck lambda sensor out. Oh, it did finally come out, minus the damn threads. Spent the rest of that day running around, trying to find a metric M18 x 1.5 tap. All that sorted, I got it back together at 4:30am. Worth it though. Above I was really just writing my theory on what I felt was the issue. It was great to be proven 100% correct. The valve guides were worn to hell and the lambda was ruined. With all installed and running, the car is completely transformed. I know it will take a little bit for the exhaust to be "cleaned" out from all the nastiness that has been pouring out my motor but it is not spitting, no more backfires, is not smoking or sooty. FINALLY!!!
On a side note, the head is just wonderful!! It really makes the SPi much more usable on the streets. Pulls so clean, all the way through the rev range. VERY happy with Keith's work and he is so helpful