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Your ’54 Johnson is acting normal and seems to be in excellent condition with 95 lbs compression. The non thermostat 5.5’s don’t have a water jacket under the exhaust cover like the ’59 and later motors do and the cover is exposed directly to the fire and flame in the exhaust gases. Three horse motors are designed the same and that’s why the paint scorches. A little trick I use to prevent this on restored motors is to install a ’59 and later inner exhaust plate to prevent the hot exhaust gases from burning the paint. Three seconds is a long time to hold your hand on any motor and with all of the water being pumped, I’d say it’s OK.
I’m pretty sure ’54 was the last year for the removable flushing plug while the 55’s used the same casting but it wasn’t machined to accept the plug. OMMC offered a pointed rubber attachment which fit on the end of a garden hose which could then be used to flush the non running motor thru the plugs hole.