Dennis and Mike,
Thank you for your views concerning the condenser replacement. Last summer, I saw a local Jag shop replacing the condenser, and they had removed the bonnet which was resting on a plastic foam on the roof of the car 
. I should receive the condenser this week.
I ordered in a leak-down tester. Even if the cylinder compression test and vacuum gauge diagnostic checks gave great results, I think it is good to perform a leak-down test. If there is a leak, the head gasket replacement and valve job are necessary. Luckily, there is a great case description by Dennis: https://forums.jag-lovers.com/t/water-in-the-oil-1989-xj40-ouch/376624/64
I found a recent video of the valve job: Jaguar XJ40 Valve Job - YouTube
Here are videos of the head and valve job, even if they are for the Series II XK engine: https://www.youtube.com/watch?v=FdSL9fKGSZ4&t=130s
https://www.youtube.com/watch?v=7cFh-u3QXhg
https://www.youtube.com/watch?v=AMgIBVO6OgM
https://www.youtube.com/watch?v=Zs4Tkeel00Y
https://www.youtube.com/watch?v=Rme6I8g6sAo
https://www.youtube.com/watch?v=grxVpJUTsI4
Dennis, did you renew any valves? Steven said here https://forums.jag-lovers.com/t/head-gasket-replacement-cost/387556“I did not cut the valve seats. They looked good with no particular wear or erosion on the seats or the valves and no wear on the stems so I just cleaned up the existing valves and then lapped the valves into the seats, set the valve clearances, and replaced the valve seals when I reassembled the head.”
It is good that I have the head gasket set already, even if I would probably need to buy a new inlet manifold gasket since I have used it already. I have also used the valve cover gasket, but that could be reused, I think. I would need to make a cam alignment tool following Bryan’s measurements, and buy a set of head bolts or maybe use the existing bolts that have not been reused before most likely.
Overall, the head gasket job would be complicated, of course. However, since I have done many repairs around the engine I know how to dismantle many things in order to get to the cylinder head.
All in all, I need to make further investigation before I start to take the head off 
.