I wonder if there might be some connection between the low compression and the appearance that the IP is faulty somehow?

Might it be that the low compression is a piston ring issue (if the engine had sat for a long time and the rings have seized in the lands as they are known to do) that also might contribute to the engine sucking crankcase oil up past the seized rings ala` a "run away" engine? That is why the air valve can be used to effectively throttle the engine, it might explain the massive smoke issue also.

Might be worth holding off delving into the IP and first try to get a look at if there is some other factor that could contribute to or even precipitate this set of symptoms, if you're diving into the engine anyway it should be pretty clear what's going on with the compression and that might have a bearing on the broader situation.