Ok so it fires with the new firng pin. No problems there?
1. Make sure the extractor slides back and forth easilly. Sometimes you need to file or hone just a little off the sides so it slides freely.
2. Make sure your gas piston is NOT pitted.
3. From what I could tell in your pic, your chamber didn't look like it was too bad judging by the condition of the fired case. Therefore, I don't think it is your chamber you should be concerned with.
4. Make sure the gas cylinder cap is TIGHT, then put the retainer in place.
5. This may sound real dumb, but make damn sure the port in the barrel is not plugged. Use a torch tip cleaner or similar tool to clean the gunk out of it.
6. Polish the outside of the gas piston and then clean the heck out of the inside of the gas cylinder. Make sure the piston slides in and out of the cylinder smoothly. You don't want any slop in the fit of these two parts, if there is one of them or both may be worn too much. Lightly oil these parts with something like rem oil. When I say light I mean a little spray and then whipe most of it off. Don't need a lot of lube there, but just enough.
7. Usually if it is jamming or failing to feed you have a problem with the magazine but from your description it sounds like it just isn't extracting.
8. After you do all this, try some cheap factories like the rem corelockts (150 gr.). It should function with these without a hiccup. By the way, Redneck is the professional here so you may want to pm him and he will probably further assist you. Good luck with it.