Heres an update on the steam valve. I pulled the machine apart (not difficult) and removed the valve. Its made of brass but the mating surfaces of the valve itself seem pretty poorly machined. Surface irregularities are what allows the leakage.
I tried cleaning it up with a bit of grinding paste, but without any improvement. Then I tried to buy a replacement valve - told that they are not available as a service part.
So much for the Ikon - pity, it made a pretty good cup. If you have one, Id recommend not tightening the valve more than is absolutely needed, the material its made from is quite soft.
My solution: Ive ordered a Rancilio Silvia.