.041" in the holes with .040" or so head gaskets just will NOT work well. Not only does that lower the compression nearly half a point, combustion efficiency is very poor, as you were finding out.
For our engines here, we shoot for .035" quench, and NEVER over .040" for any reason.
Finishing up a Pontiac 455 Super Duty engine in the shop this weekend, pick of deck height attached.....Cliff