Everything looks great now that the head is off, I can see where the gasket failed, it was a large break. Now that the head is off should I soak it in laquer thinner or clean it thouroughly? its a 1990 loyale turbo 1.8

There are some good ideas to clean the head/block mating surface here: http://www.ultimatesubaru.org/forum/showthread.php?t=43204&highlight=cleaning+head+gasket+material

If you want it real clean, take it to an engine reconditioner and get them to acid bath it. It will come back looking like new.