Sounds like the machine work is at fault to me. 85 ft/lbs is fine (not that different from the ARP 81 ft/lb spec), as long as moly was used to lube the studs. If this machinist does not have experience w/ a 7M and he used motor oil (like a lot of old schoolers will) that is not near enough torque...the ARP spec for studs using motor oil is 105 ft/lbs...not even close. Also, if he did not pay attention to the HKS RA spec (30 RA) for that MHG (I assume a bead type) and get the block/head deck smooth enough...that will cause a problem too. One other thing on the MHG...if he used copper spray on a new MHG, it will deteriorate the factory viton coating which can cause a problem with the initial seal.
Regardless if this machinist does race motors or not...if he is used to doing domestic engines and does not pay attention to the tight tolerances required on a 7M, you are going to have problems. Also, after at least 5 heat cycles, you should have done a re-torque on your ARP studs.
14 psi of boost should not blow a MHG...that is unless you allowed it to go lean and experienced detonation. If that happened, there is not MHG out there that can take abuse like that for very long. Do you have a wideband O2 to monitor your AFR's? To do a decent "street tune", a wideband O2 and EGT gauge is just about mandatory.