[s-cars] Wife's A4 has oil consumption/white sludge. HG?

[Brian Powell]

Greetings, I am posting to this list as well as the a4 list because of 
the experience of the s-car people.

I am trying to track down a problem on my wife's 96 A4 (12v V6).  
First, let me give you a little history to give you a sense of my 
reasoning:

Car has 83k miles, and has been absolutely trouble-free said for one 
incident below.  The timing belt, pump, etc. were all changed at 60k 
miles.  About 19 months ago, on a very hot day 100+F here in CO, my 
wife called me to tell me that the overheat light had come on the car 
and she pulled over and was parked.  She was about 3 blocks from home, 
so, I walked down, opened the hood, let it cool for a few minutes, and 
nursed it home.  I began inspecting, and found that somehow, the plug 
of the thermoswitch had been sheared off.  I flushed/replaced the 
coolant, built a new plug, and put it back into service.  Winter 
quickly came and no problems.  The following summer, I noticed coolant 
temps were quite warm about 2/3 of the way toward H, when that car was 
always stable at 1/2.  Finally, I tracked it down to a failed fan 
clutch.  I decided to change the thermostat, flush the coolant again, 
and do some nagging work (replace the valve covers because of a slight 
oil leak).  When I changed the valve cover, there was some white 
pudding sludge where the oil feeds into the valve cover in the 
right-hand bank (the bank with the oil cap).  This had me concerned 
regarding the previous overheat incident that coolant was leaking into 
the oil, but, there was a crack in the valve cover (this engine uses a 
PLASTIC!?!? cover).  Also, the coolant level is always constant.  I 
repaired everything, put it all back together, and sent her on her way. 
  The coolant now would occasionally inch past 1/2 on hot 100+F days, 
and according to VAG-COM, the temp would reach 104C.  I didn't worry 
too much.  This winter, her temps hover around 90-92C in 30-40F ambient 
weather.  I think the thermoswitch is busted as the electric fan now 
runs on high when the temp hits 90C.  No worries there though.

The last two oil changes, she has required about a quart during the 3k 
miles between the changes.  This car never used to burn oil.  Last 
night, I went to check on the oil level, and it was getting low again, 
so, I went to add oil (always use Mobil 1 10-30 for that car) and there 
was some white sludge under the oil cap.  I checked the coolant level 
and it is the same as when I filled it last summer.  I checked the 
coolant itself and there does not appear to be any oil (the coolant is 
a turquoise blue still).

Now, I am concerned that there may be a head gasket leak, or something 
that is causing oil to burn and moisture to get in there.  The oil cap 
doesn't seem to tighten down like it used to, but, it feels like it 
seals.  The sludge wasn't on the left bank when I changed the valve 
cover gaskets (no way to check now without removing the cover).  What 
could be causing this?  Is it a concern?  Should I fear head gasket?

The other issue is that she drives about 5 miles to work, so, the 
coolant gets up to temp; however, the oil doesn't usually get up to a 
boiling temp.  Maybe it is simply because it can't burn off the 
moisture (though, she usually ends up doing some highway driving for 20 
miles or so once a week).

Any tips or suggestions for where to look are appreciated.

Cheers,
Brian