With any testing method, the old expression "the devil is in the details" certainly applies.
With compression testing, how strong is the starter, the battery (or how long is the rope and how strong is the guy on the end of it), Is the choke open, is throttle open, is air filter restricted or clean, Do you have a good seal in the sparkplug hole etc The biggest one is how many "puffs" do you collect before you read your pressure. I've always used 3 which seems to be nearly the peak for most decent cylinders even if you were to let it turn over longer. I think the first puff is probably the most important, but any problems with seal in sparkplug hole etc and that number can be very skewed.
With compressed air/blow down testing, how big of an orifice is the air going through into the cylinder, what pressure is the air source regulated at etc.
The important part is that the cylinders of a multiple cylinder engine have similar results. There are just too many different things that can affect the resluts to say definitively that the compression is OK or too low etc until the results are way out.
I like to do the blowdown testing to diagnose leaky valves (which valve), which cylinder etc much more easily than when using compression testing. Doesn't tell me much about cylinder and ring wear because I don't have the calibrated orifice and pressure regulator etc that CAT specified, I just turn whatever shop air pressure I have available into the cylinder at TDC compression stroke and listen where its going.
On this pony motor, I would get the pistons out and see if they are reusable and price a set of rings before deciding whether to bore to an oversize or have it bored and sleeved back to standard to use the original pistons. Of course, boring to an ovesize will raise compression ratio, so the engine may have slightly more power after that treatment than if you went back to standard. Probably the least effective course would be to hone and re-ring it as is, but that would almost certainly help it.
I also have dealt with a D6 poiny that was puffing the dipstick out of the hole and I was certain that it was on its last legs and nearly to the point of being unusable, until I cleaned the carburetor completely. Made a "new" pony out of it! I sold the tractor to a friend last year and within a week, he was calling to tell me he couldn't get the pony started. So I went to see what the problem was and found that he (like me when I first started) had neglected the advice to ALWAYS stop the engine by turning off the gas supply valve. The pony had a liberal coating of gasoline diluted oil splashed all over the governor/waterpump belt and that side of the engine. Changed the pony lube oil and it fired right up and starts the main just fine. I don't know what the compression test would show on that engine, but it has to be quite low.
D2-5J's, D6-9U's, D318 and D333 power units, 12E-99E grader, 922B & 944A wheel loaders, D330C generator set, DW20 water tanker and a bunch of Jersey cows to take care of in my spare time😄