Yea, either a good candidate for building up bigger, or you could simply have a cylinder head issue. Head gasket failure is fairly common on engines that have been raced hard and put away wet. Also make sure that there is valve lash -- some builders use negative lash. For it to be leaking 14%, there's got to be something more wrong with it than excess crank endplay.
Out of curiosity, as you are checking your leakdown, take up the endplay in the crank (ie push the crank hard one way, then the other) and continue to monitor your leakdown gauge. If the rod rides up on the radius of the crank journal, the piston will be cocked in the cylinder and cause additional leakage.
Either way, you've got something that needs some attention - pull the head and check it a little deeper, then decide if it's worth retaining as a 206 with a fresh-en up of the cylinder head, or build that rascal up into something stronger, BP animal, Jimbo's superstock, limited modified, or a small block open.