the metal flakes could have come from the bearing itself. if the bearing is destroyed that could be why there is no compression in the engine.

id give the bearings a good once over. but if it was running when those flakes got there, id be prepared to price out new engines. when the engine is apart, look around the base of the piston sleeve. I had the same thing happen once and i couldnt find where the flakes came from. come to find out that the bottom of the piston sleeve had gotten chipped up somehow.