Corolla / Matrix 2009-13 :: 2zr-fe Engine Getting Progressively Harder To Start In Cold Morning

2009 Matrix with 2Zr-Fe engine (233,000 km or 145000 miles).

Engine has been getting progressively harder to start in the morning, especially when it is cold. Once its warmed up then it starts no problem next time. Occasionally I get the dreaded P0304 code upon startup. Also runs a lot rougher but that's hard to quantify here, I'm just going by sound.

Decided tonight to go through a complete checkup and here is what I found:

1. Looked for a dead cylinder by idling the car and disconnecting each fuel injector one at a time - everything was as it should be.

2. Used my spark tester (OTC 6589) and tested each coil in turn (yes I had the tester connected to battery negative using a battery booster cable). Each sparked strong and correct colour.

3. Pulled all spark plugs and checked them for cracks, carbon tracks and electrode gap, all were fine.

4. Did a dry compression test.
- Uh oh , 2 cylinders (3 and 4) were @ 115 psi, 1 and 2 were at 150 psi (which is also low as standard spec for 2zrfe notes it should be between 157 and 199).

5. Did a wet compression test
- cylinders 3 and 4 now ended up at 150 Psi so that indicates worn rings or pistons?

6. I didn't bother with the fuel injector testing as it looks like the problem is with compression...

So, first, is my diagnosis correct? Could it be a bad head gasket?

Second, is there something in my procedure above that I could have done wrong? The car was warm but not hot. I pulled all spark plugs before starting testing. I didn't take much time between plug holes.

Third, other than rebuilding or replacing engine, are there other options or am I out of luck?