adjusting valves

I agree with Rick; if you have working hydraulic lifters then they should be set beyond zero lash for the lifters to work as designed. However, if you are adjusting them without the engine running you have no idea where 'zero lash' really might be.

To minimize lifter noise as the engine runs the amount of oil in a hydraulic lifter adjusts itself to maintain zero lash. Its not the same amount of oil at idle as it is at higher RPMs nor, necessarily, the amount when the engine isn't running. They work by balancing a small, calibrated leakage of oil with the amount of oil pumped back into them under the engine's 55 psi oil pressure. Every time they open a valve a small amount of oil is pushed out of the lifter which has to be refilled. The refill rate is fixed by the oil pressure while the oil leakage depends upon how many times, and how fast it pushes open a valve. The whole thing depends upon oil temperature as well since viscosity and flow rates in and out change with temperature. None of that process is happening on a non-running engine.

Without running there is no oil pressure to put more oil into an over-adjusted lifter so you will just 'adjust' back to, and then X turns beyond the incorrect setting you had to start with. Each time you try it you will be collapsing the lifter plunger further and further into its bore. Fortunately, the engines allow a large range of (mis)adjustment before there is a noticeable affect on how the engine runs. If a hydraulic lifter in good order is adjusted cold the oil will also hardly leak at all because its so viscous. That could hold your valves open and cause zero measured compression as you reported.

Adjusting them on a warm running engine takes away all those problems and starts you off with a fully extended (oil filled and clattering) lifter which is how you define the true zero lash. The reason for turning them slowly that final 3/4 turn is to allow the warm oil to leak out of the lifter; otherwise you will be holding the valve open (little compression) and that cylinder won't fire until the lifter leaks down. The +3/4 turn (Ford spec has varied from 1 1/2 to 3/4 turns) is to make sure that you start out with the plunger deep enough into the bore so that you never run out of self-adjustment range in either direction as the amount of lifter oil varies up and down when the engine runs at its various speeds.

Without the engine running when you back off the nut the lifter stays collapsed (except for the flimsy spring inside) and by your method you will never find the spot that is zero lash which is when the lifter is full of oil and its plunger is at the top of its stroke. In order to not have the push rod turn means you are crammed way too far down on the collapsed lifter and it may well be bottomed. That would easily explain why going further holds the valve open. With that adjustment you don't have a hydraulic lifter.

The shop manual doesn't say to turn the nut down until the push rod won't turn. It says 'just remove all the push rod to rocker arm clearance' which means when the push rod is lightly touching the top of the plunger. Then go 3/4 turn beyond that. Rotating the push rod is only one method you might use to determine that spot but not the only method: '...rotating and/or moving the push rod...'. Concentrate more on vertical movement in the push rod and forget about it being hard to turn; it likely will turn pretty easily if well oiled. You will probably even be able to push it down but that would be against the spring inside the lifter.

With the factory idle speed of 500 (for a C4) there is hardly any oil spillage with the valve cover off. I don't use anything fancy, just an old rag on the exhaust manifold while adjusting. Its not like brake fluid, even if some splashes out its not going to damage the paint. The mechanical clatter will easily tell you when you go above zero lash.