V8 Engine Problem

[Weiss, Dave]

Hi, guys!  I've been off the list for a while (still working on the house,
after >2 years)  and still have the 5-speed.  A serious problem has come up,
and I'd really appreciate some advice.

The car has always used oil, but it's lately increased, and is now about
500-700 mi/qt, depending on how heavy my foot is.  Good power, occasional
misfire on lift throttle and light throttle.   Mobil 1 15W-50 since 70k when
I bought it, now at 125k.  Ned's chip, other engine and exhaust stock.
Looks like no false air.  O2 sensor faulting, only a year old, probably
fouled w/ oil-- never had an engine fault before, and I've been trying to
track down the misfire for well over a year.  Can see slight smoke on
acceleration, nothing on startup.

Good compression all cylinders (and w/in 10%).  Cylinders 2, 3, and 8 have
significant leakdown, and can hear air going into crankcase on those
cylinders.  Plugs 2, 3, and 8 show a little more brown deposits than the
others.

The two-year-old water pump (w/ the new plastic impeller) just developed a
drip, as well.

Opinions from 2 mechanics are very different.  Both mechanics are from very
reputable shops.

1)  Leakdown can't check oil rings because they have different angle to
cylinder walls when engine is running.  Also, ring gaps could be lined up.
Probably valve guides, but if head teardown shows they're not too bad, can
replace rings (and rod bearings).  $1800-2500 if it's just the head(s).
$5000 absolute worst case w/ used engine (and he says can swap rear plates
to mate auto engine up to 5-speed).

2)  No way three of the cylinders should have leakdown like that.  If the
valve guides were badly worn, the valves wouldn't seat that well, and
compression should be worse than it is.  Ring gaps wouldn't align on three
cylinders.  Oil rings are bad, compression rings probably ok.  Never re-ring
a V8; needs a short block to eliminate the oil consumption, do the heads
since they'll be off, $11k-12k.  His recommendation is replace the water
pump, t-belt, and front seals, switch back to mineral oil and drive.

Any thoughts on who might be closer to the mark?  Is it possible to swap in
an engine from an A/T car, and how much do used V8 engines go for?

This email address is at the office, so I'll check replies Monday.

TIA,
Dave Weiss