Well, since the gauge showed decent values on the other cylinders, it is likely working.
Yes, with "0" compression on a cylinder, you would expect to see something wrong once it was apart.
Could be as simple as a dropped valve guide that can hang a valve open at times, thus no compression. You should be able to look in the valve ports and see a dropped guide.
Before pulling the engine, doing a leakdown would have been best, then it would tell you if it was valves or ring/piston related.
What was the room temp when you did the oil test?
What weight oil did you use?
If a heavy oil in a cool room you may not get much leakage, but using kerosene flows pretty good in any temp.