Greetings.

I just had the same thing happen to my '80 right after I bought it.
If you are really, really lucky, it is just a valve seat that has
come undone, and can be repaired.  But for the amount of work
involved to get to it, probably it is worthwhile to just get a new
head.  BusDepot has reman. heads for around $189, I think (with
improved valve seats, so they say) but the amount of work is fairly
substantial.  I just paid a garage to do it - was around $1200 for
the head.  Ouch, I know, but I needed it quickly, and I had not done
a head on a VW Vanagon, so I bit the bullet.  Be sure to get a new
valve cover gasket, and also get really good push-rod tube seals.
Two of mine leaked after the mechanic job (but that's what warranties
are for, right?)

David.