Well, Doug, that's one of the things I've read online that can cause detonation. www.mikuni.com/tg_detonation.html Points and timing are definitely to be checked.
I think the issue Noel identifies is another possible cause of detonation, too. The engine did get so hot it seemed to smoke, although given the hole in the head, that "smoke" was likely heat escaping through the hole in the head. But I'm amazed how the two heads look almost identical, both in the shape of the hole and the location of it. I'm thinking that my engine may have a sticky exhaust valve, too, especially because my tractor had little use for the past 5 years due to the health of the previous owner. Things will start to freeze up from lack of use.
On another topic, since the engine has been rebuilt once, it'll be interesting to see if the balance gears were put back into the engine. From what I've read, almost anyone who rebuilds these engines recommends leaving the balance gears out.