I replacing the head gasket on my 95 4runner with the 3vze. When pulling the heads I notice piston 1 sitting lower than piston 4 at TDC. I rotated the crankshaft and all piston rise higher than piston 1. I'm thinking it might be a bent connecting rod. Does anybody came across this same issue before? The piston is only sitting about a 16th of an inch lower than all others pistons.

First off, did you stop turning the crank when the timing mark lined up or did you stop when the piston was at its highest point?
second, piston height effects compression ratio, so if it is indeed sitting lower in the bore than the others it should have lower compression as well.