Seems to me like you have a real case to go back to that engine builder and ask for a refund. As Streets said, sounds like water got into one of the cylinders from either a headgasket leak or a crack. Water does not compress so that is what is meant by hydraulicing. Water won't compress so something has to give, either a connecting rod, cylinder wall or combination of the two. Did you retorque the heads after initial break-in? From all the other things that were wrong it really sounds like shoddy workmanship on the assembly.

Pat