Have a cylinder compression/leakdown test done before you decide on a course of action. Diagnosing internal engine problems by taking an educated guess is asking for trouble. In my experience, problems with M112 valve stem seals are virtually non-existent. The only time I've ever replaced them was as a pre-caution, when the motor was torn down for other repairs. All the oil burners I get at my shop end up needing new piston rings, at best. I've seen plenty that needed engine blocks/pistons too.

Make sure you find someone with experience at re-ringing these engines, if that's how it ends up. Otherwise, you may wind up spending a lot more than you need to. Good luck, and let us know what happens.