Leakdown tests check the condition of the valve seats and piston rings. Nothing checks valve seals except the presence/absence of blue smoke. A compression test can be of some use as well. The leakdown test requires high pressure air (from a compressor) and a special tool with adapter, to pressurize the cylinder. The tool has one or two gauges and tells you the percentage leakage from the cylinder. You can figure out what's leaking be seeing where the air is going - crankcase (rings), or intake/exhaust (valve seats).

Your oil consumption is excessive for a 603, though. Mine are one quart per 5-8kmi and most other people are in the same range. With yours at one quart per 1250 miles, I have a really really bad feeling you're about to embark on the dreaded bent-rod issue that plagues all 603.97x engines. That is the most probable cause of the oil loss (it COULD be the turbo but that's not really likely.)

A member of the MBZ email lists recently ordered a factory 603.97x crate engine from Mercedes, he's expecting it to arrive from Germany shortly. After much research into repair shops, machine shops, etc he finally concluded that truly was the most economical way to fix the problem (parts & shop labor are NOT cheap!). If you end up having to go that route, I can put you in touch with him for some pointers. In the meantime:

http://www.meimann.com/docs/mercedes/OM603_rebuilt_engines.pdf