Could not find external leak, so assumed problem was in the cylinder head. I removed the big, black plastic shroud, and disconnected the line with the cooling fins leading from the cylinder head to the tank. I then unbolted the 4 Allen bolts holding the cylinder head to the cylinder body. I discovered the gasket that sits on top of the valve plate was shredded in the center piece that separates the intake port from the exhaust port. I put in new reed valves (PS10044654) and replaced the blue gasket between the cylinder and the lower valve plate and the metal gasket between the valve plates and the blue gasket on top of the upper valve plate. The gaskets are part of gasket kit PS10044723. I had to scrape the old blue gaskets off, which was the most time consuming part of the repair. I used valve grease to hold the reed valves in place during re-assembly. I did not use the gasket at the base of the cylinder or the gasket that is used for the crank case cover since neither was removed. Reinstalled the Allen bolts, the line to the tank from the cylinder head and the plastic shroud. Compressor works fine now.
Found the part at Part Select ,simply removed the worn out valve with an adjustable wrench and put new valve in, tightened it and the repair was completed, tested compressor for leaks .SAVED $149.00 by replacing a $7.00 part.
It's only 4 screws that hold on the cover. I just swapped them out. Luckily most of these cheap air compressors use the same parts. So even though this is for a craftsman air compressor, it still worked for my air stream air compressor.