I really respect the expert opinions on this forum. I've been searching for specifics on my case and haven't found exactly what I'm looking for, so decided to solicit advice directly. Thanks in advance for any help.

Car: 85 300d turbo diesel, 260k, no signs of any major engine work (I've had it the last 6k miles), but I have replaced injectors, valve seals, timing chain, adjusted valves.

Sympton: Blowing blue smoke mostly only at idle, tea kettle test dances the filler cap, but doesn't totally blow it off--so could be worse; using about 1 qt rotella 15/40 per 900 miles. At initial takeoff, I observe a pretty impressive puff of blue smoke in the rearview, but then it dissipates underway. So tested when parked--I give it the fuel, puffs blue initially, then I hold rpm's at 2k or so and smoke dissipates.

Car performance: Really quite good--15 sec. 0-60 times consistently. Idles well when warm and burning either bio or Cetane 45 diesel. I've fooled with ALDA and have it to where I get a small puff of black under heavy load and then it dissipates. Doesn't use coolant to signify head gasket.

Here's the kicker: Ordered up my Harbor Freight compression tester off of Ebay ($35 including shipping) to really see what I'm up against. Did the dry/wet (squirted 1 tsp. oil in cylinder) in a semi warm engine (got up to operating temp., then sat maybe 40 min.s in 50F weather (yeah, beautiful day yesterday!). Numbers as follows:

#1 - 360, 420
#2 - 260, 300
#3 - 220, 220
#4 - 100, 120
#5 - 260, 320

Did I mention that when doing timing chain (should have just done a rebuilt head then, but just wanted to get GRIESL bake on the road), noticed a few valve guides giving a little play, but I didn't write down which ones, wish I had, but I suspect #3 and #4.

Obviously a few issues going on here. Number one way up there, etc, but.... I actually view #3 and #4 as good news that they didn't respond to the oil squirt. The car runs so well now that I was shocked I had a hole at 100!

Question: Is it head or rings? Or heaven forbid a holed piston.

How do I interpret these numbers. Are the wet numbers on 1, 2 and 5 so bad that I should resign to doing rings? Or are the dry numbers on 3 and 4 encouraging enough to remove the head and have it reworked by, say, Metric? Would the squirt of oil reveal broken or stuck rings? Combined with the info about smoke dissipating at high rpm, is that a sign that would point more in the direction of valve guides?

I really like the car--body is great with no rust, handle's well, shifts well, and I have about 3k in it right now. I'm not opposed to doing the head (I would probably do the labor myself), but an engine rebuild would take too much of my time and the cost to pay someone to do it may make me pause. I'm currently mining ebay and other sources for a good used engine, but that seems risky if my engine only needs a head.

Again, thanks in advance for help.