If this is an M103 engine, the problem could very well be bad valve stem seals. Have you done a compression test or leakdown test.

I would probably skip the compression test and do a leakdown test and listen for air escaping heard through the oil filler hole. If you do here air escaping through the oil filler hole then you have a cylinder problem, if not it is likely the valve stem seals or valve guides. If this diagnosis proves positive, I think I would just pull the head, do a valve job and replace the valve guides. The bottom end of the M103 engine is very long lived and it would be worth the effort IMHO as long as the cylinders pass the leakdown test.