Remember, the O-ring only seals outside the distributor (between the housing & timing cover). The O-ring doesn't seal anything from going up the shaft & contaminating the trigger points. The only things you could do to reduce/eliminate oil contamination are:
- Rebuild the distributor shaft bearing,
- Fabricate a felt pad or other blocker below the points,
- Find a way to reduce crankcase blowby.
Crankcase blowby (higher pressure in the crank than the distributor) is the cause of fine oil vapor escaping out, which then condenses in the relatively cooler distributor (cooler than the crankcase). These engines don't have a PCV system, but I wonder if you adapted one to it, if it'd help.