Sounds like rings to crankcase blow by to me. Does this engine have a breather on the side of the crankcase? My IHC Cub engine, essentially an Atomic 4, has this breather that before my restoration, would emit blow by gasses. There is no other source of pressure to emit oil or gas. You could run a compression test once again.
You may find broken ring bits in your oil pan. Bill Dakin S/V Tapestry 25MKII
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