It will collect where the oil flow is the slowest, meaning the rear of the head. Probably a bit hotter back there as well.

I see lots of black sludge on the casting -- can you wipe up some black grittys stuff of the depressions in the head where the casting is rough? If so, hard sludge.

Run several changes of good oil with filter on short oil changes, this should all come out, it's not good for the oil pump. I'd wait to switch to synthetic, if you are planning that, until you get the engine cleaned up a bit first!

Peter

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1972 220D ?? miles
1988 300E 200,012
1987 300D Turbo killed 9/25/07, 275,000 miles
1985 Volvo 740 GLE Turobodiesel 218,000
1972 280 SE 4.5 165, 000 - It runs!