Oil in Cyl #1 valve cover cavity
 

1995 E320 w/207K miles ( 104.992 engine )
I recently did head gasket and valve cover gasket replacement, including all the rubber washers and seals that are associated/accessible during those jobs. Also wiring harness replacement.
Drove the car for about 500 miles and almost all seems good. The car runs fine under acceleration but when coming to a stop there is a slight miss at idle. When I press on the accelerator the engine will dip to 500 for a second before RPMs climb and it smoothes out. If I come to an abrupt stop the idle will fluctuate between 500 to 700 for about 10 seconds before it levels out to 550 with a slight miss.
I decided to replace the spark plugs and the connectors hoping that would be the fix. Previous plug change was at 180K using Bosch platinums. I was really surprised when I pulled the spark plug connector from cyl #1, the connector came up drenched in oil. The spark plug was sitting in a puddle of oil. The bottom of the plug that faces the cylinder seemed dry, though tough to tell because as I pulled it out the oil that was sitting there would have run down the plug. However, there was no smoke when previously running the engine so I assume there is no oil problem in the cylinder itself. The other 5 plugs were dry. On a side note, I am surprised that all the spark plugs were about 90% worn, there was almost nothing left of the tips. Aren't these platinums supposed to be good for 100K?
Anyway, back to the subject....I installed standard OEM bosch plugs and new connectors. When I started the engine there was quite a bit of smoke, I guess that was from the oil that leaked down into the cylinder when I removed the spark plug. After a minute or so the smoke stopped (burned off?) and the car runs just about the same as it did before the plug change.
My bigest concern is the oil in the spark plug housing, can anyone help with ideas? Could it be a dislodged rubber seal or washer from the valve cover kit?
My second concern is the slight miss, would the first step be to search for vacuum hose leaks?
My third concern is what caused the old plug to wear so fast.
Hope you guys can help with ideas.

If you had oil pooling in the plug cavity then most likely the seal for the valve cover isn't good or your oil cap might be loose.
Oil inside the cylinder could mean a leaky valve guide or a stem seal failure or bad installation.
Clean everything up, install a new spark plug and then take your time to find where the leak is at.

I had the same problem with mine this year (oil in spark plug 1 cavity).

I discovered a crack in the valve cover in the passage that lets cooling air into the covered center section. There is a web in the casting on the underside of the valve cover and the crack followed it. I will eventually get it welded or pick up another one but for now I cleaned it and put a bead of epoxy on the upper side over the crack.

I also degreased the circular spark plug opening seals and mating surface in the valve cover and added a thin bead of RTV for a better seal (not between the seal and head). Not enough that it squeezes out as you don't want that garbage floating around in your engine if it breaks off.

I was not able to positively tell if the oil was coming from the crack or the seal.

If your valve cover bolt seals are the original they should also be replaced (twelve 104 016 03 64) but probably not your problem in this case.

Edit: I used Permatex sensor safe RTV.

RTV/silicone is death to catalytic conveters, avoid using it even in oil-contact.

...and 02 Sensors.

Oil in the spark plug well will foul the spark plug and that is why your are getting slight missing.
Run a small piece of Bounty all along the valve cover gasket when the engine is hot and you smell the oil burning. If bounty is soaked with oil, redo the valve cover gasket and you should be fine.

Spark plug wear so fast- Most likely wrong gap or Low heat transfer plug and stop and go driving or High heat tranfer plug and Highway driving. I don't know you tell me?

You do not run Plats on a 104 w/DIS Waste Spark Ignition systems...

Period.

I found the cause of oil pooling in cylinder #1 cavity: I removed the valve cover and found the rubber seal at cylinder #1 had come off, it was just lying loose under the valve cover. I put it back in place and re-bolted valve cover hoping that snugly torqued bolts will keep everything in place. Spec calls for 10Nm. 4 of the bolts wouldn't hold torque, they stripped. I'll take care of that tomorrow and then give it a test drive.
Is it possible without that seal in place air was leaking in and messing up the vacuum in the engine, thereby causing the miss/rough idle?

Agreeing with Arthur Dalton - Don't run platinum plugs on this motor. Nothing good can come of it.

There are some compounds of RTV that are not harmful to cats or O2 sensors. At least that's what it says on the tube.

I closed up the valve cover.
Removed vacuum line from Fuel Pressure Regulator, no fuel coming thru at idle.
re-checked several vacuum lines, disconnected and re-attached to feel how snug they were. They all seem good.
Restarted car, it was rough for about 5 minutes, burned some residual oil that seeped down from cylinder # 1 plug cavity.
I cleared all codes then disconnected battery for 5 minutes.
Reconected battery, took it on the highway and now idle is smooth as glass.
Either the dislodged valve cover seal at cylinder #1 was culprit of vacuum leak or there was a leak in one of the vacuum lines that I closed.
In any case, I am now idling smooth.
Thanks to all for inputs.
(also posted on 1994 diagnostic LED trouble thread)