97 Cougar Problem

That could be true... sometimes a Head gasket can fail between cylinders, and the only indication is as you see.

Suspect valve or spark timing first, though

I figured maybe it had jumped timing, because it still will fire but it seems like its at the wrong time...If it is the timing chain/gear worn out, will that hurt the engine? Can it be fixed without internal damage?

Could be or maybe not.. there's a thing called a 'leak-down test' that would determine if valves are bent. Or headgasket fail between cylinders.

Probably

Note: You arent going to get comprehensive help on the entire problem and solution/repair, here. There simply isnt time or energy. The answer is to get a book, or the shop CD off ebay... and figure things out for yourself.

Further info may be on