I would like to thank everyone for their input. I think the culprit is the bullets . I did a thorough cleaning and tried it again using mild smokeless load. I still had bullets keyholing. I cleaned the rifle again and retried the pyrodex loads and the results were the same.
The rifle is an 1886 with the rod bayonet. Read somewhere for better results remove the rod when shooting.
I use the subs because it is hard to get real BP here in NY. Looking at the price of BP bullets at Montana bullets I think I will stick with jacketed bullets for the time being.