[Vwdiesel] Oil in the coolant

[Neil]

I'm a little new to this DIY stuff (D iesel I njection Y ipee.. right?) stuff, so I thought I'd ask here...

My '81 rabbit 1.6 na diesel is a rough, rusty old beater and I just love it...  but now oil is starting to show up in the coolant tank.  Not  whole lot, maybe an eighth inch in the spout.  No water in oil, as far as I can tell...  Performance is down a little (and it doesn't take much of a drop in a na d!)  starts ok when warm, a little balky when 'cold' (75 dF, desert in summer).  I suspect I've overheated it...  darned alternator took half the electrics with it when it went, including temp guage.  There was always plenty of coolant in the tank; could it have gotten hot enough to blow a gasket or warp head without boiling dry first?

The local ex-spurts are of 3 opinions...  maybe a headgasket, maybe a warped or cracked head.....  maybe a cracked block...

So...  are there any other probable causes?  and, short of tearing it down, anyway to tell which problem it is?  Can this be diagnosed with a compression test?

Thanks for the help!

Neil