195.6 flatty questions.

In a flathead the more you mill away at the head, or top of the block, the smaller the area gets that enables the air and exhaust to get from the combustion chamber to the valves.
There is a technique called relieving where you grind small areas between the valves and combustion chamber to help this flow, but this of course decreases the compression ratio.

I had a 59 flathead back in the 60s. The 59 flathead had a advertised compression ratio of 8 to 1. I got a Fenton aluminum head that had a advertised compression ratio of 8.5 to 1. I decided to have the head milled just a little, just to clean it up before installing it, likely only .010, but before that I did a little relief work on both the head and block, so I don't know if I actually gained any compression.

The car ran a great deal better, but I did so many changes at one time ( 2-1bbl carbs, cam, new valves and rings ) that it was hard to say if the milling and relief work helped or hurt.

It's been a long time since I worked on that flathead, but with the valves being vertical, it would take some awfully loose valve guides for the engine vacuum to be able to suck oil uphill from the cam/ valvespring chamber to the combustion chamber.
I overhauled my flathead in 1966, I can't remember all the details.
Maybe someone else can remark on the valveseals on a flathead, I don't remember any.

You can go about 0.020" easily with no issues, probably a bit more. The area between the valves and combustion chamber does get tighter, but I don't think that's enough to worry about. You might want to check the valve lift too. Stick the head on without a gasket and see if the valves hit the head. The gasket is a bit over 0.040" compressed, so if they clear the head without a gasket you're definitely fine. A bit of clay on a valve (turn engine until valve is all the way open) will let you know. Push down on head and make sure it's down all the way. I don't think this will be a problem, even with a 0.020" cut, but won't hurt to check.

If you want to get the cam reground do this check so you know how much more lift you can use. Just touching the head without the gasket will be fine. So you can only increase the lift the thickness of that compressed clay on top of a valve. You can add duration with no problem. It's only about 244 degrees duration IIRC (I know that's the number on the OHV). Going to 260-264 will help a bit. Just remember, lift on a flat-head is directly on the valve -- no rocker arm ratio to consider.

One more thing -- you can't get new lifters. If you're keeping the original cam make sure you put the old lifters back in the exact same holes they cam out of. If changing the cam (new stock or regrinding the old) get the lifters surfaced. They are solid lifters and any machine shop can surface them. I think Galvin's will sell you a set already surfaced, and you send them your old ones so they can surface those later.

I'd seriously consider getting the cam re-ground. The stock cam is exceptionally mild and a small cam change can make a huge difference. Call a couple of the older cam companies, preferably one that still lists a flat-head cam (a few still sell flat-head Ford V-8 cams, close enough!). Cost will be about the same as a new replacement cam ($130-150), but it will be the best money you can spend on the car. I never regretted the one I had reground for my 196 OHV! I don't know if the flat-head will handle 0.10" of added lift. It should, but check! I had 0.10" lift and 20 degrees duration added to the OHV and it really woke it up in the mid rpm range (cruising range). Gave it some speed holding (while going up hills) and even a little passing power. Did nothing for take-off, positive or negative, but from about 40-70 mph I could really tell it, and that's where the little engine needed a boost. Not much you can do to make a small bore/long stroke engine turn up much faster.

Well so much for building this engine. Did a little porting to clean up the intake and exhaust ports and cleaned up the area in between the cylinders and ports that had a build up of carbon and while I got 1,2,and 3 Chamber to int.exh ports done. on #4 and 5 found some nice size cracks from the cylinders to the intake ports on both of them. This is a frkn downer. I know it's gonna cost up the ying yang to repair it and gona be A pain finding a shop that can weld cast iron so gona hold off on this project for awhile.