My guesses:

1.  Oil filter "O" ring let loose, but you indicated you removed the filter and everything looked o.k. Was it a Fram oil filter?

2.  An oil galley plug (pressed into the block to fill hole caused by machining the oil passage) let loose.  Jake Russell on this list had this happen (immediately following a rebuild, I think)

--Nate

>>> Tobin Copley <tobin.copley@ubc.ca> 09/05/00 01:54PM >>>
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Hi gang,

Blew something in my diesel vanagon yesterday, and lost nearly all 
our oil in just a few seconds, coating the engine compartment with 
oil spray, and leaving a 200m trail of oil down the road in the 
process.

I'm getting a tow truck over to the island here this afternoon, and 
I'll have my mechanic on the mainland look at it and give me a 
diagnosis.  If any of you clever people want to take a stab at 
guessing the problem, I'll post the names of the guessers with the 
follow-up (if you want).

I'll post a follow-up on this when the problem has been identified. 
Hopefully,the following description, when combined with the 
follow-up, may help someone out in the future.

A description of the problem follows. (For the record, I'm hoping 
it's a problem with--or related to--the oil cooler).

Vehicle:
--------
1982 vanagon westy, 1.6l NA DIESEL engine, <10K miles on engine 
rebuild.  Castrol GTX 20/50 dino oil, last oil and filter change 500 
miles ago.

The failure:
------------
Following a cold start in 70 degree F ambient air temperature, drove 
up a steep hill at moderate load (2nd gear @ 20 mph).  During the 
upshift to 3rd gear at the crest of the hill, oil light blinked on of 
1/4 second, went out for a little less than 1 second, then came on 
and stayed on.  I turned off the engine less than 3 seconds after 
first blink of oil light.  No untoward engine noises were heard at 
any point, although valve clatter was *perhaps* a little louder than 
usual while the engine was shutting down.  No bangs, clunks, 
hammering, lurches, power loss, or any other "expensive" symptoms.

After rolling to a rest at the side of the road (less than 1/4 mile 
from starting point), I saw the following:

- Dense trail of oil on road heading back over the crest of the hill 
(walking back home later showed oil trail started about 50 yds from 
my driveway, but without a pronounced starting splat or anything. 
Volume of oil loss along trail appeared to start heavy and decrease 
in volume only in last 1/3 of trail--coincides with decreasing 
remaining oil volume just before oil pressure warning triggered?)

- Underside of engine area heavily dripping large volumes of oil. 
Oil dripping from all over right side (FIF) of engine.

- Removing the engine compartment cover, entire right side (FIF) of 
engine compartment heavily coated in oil, with spray concentrated to 
forward portion of engine compartment.  Appeared to indicate a high 
pressure, high volume spray of oil.

- Hard to determine the source of oil with the engine not running and 
given the copious oil everywhere, but my guess is oil was coming from 
the oil filter area.

- Oil filter was still threaded firmly to oil cooler.  Removing the 
oil filter did not reveal any obvious splits in filter.  Filter still 
full of oil.  Dipping my finger into filter, the oil did not feel 
gritty or otherwise contaminated.  Oil temp at failure could be 
described as luke warm.

- No obvious holes in the case under filter area were visible.

- I did not not check oil level at the dipstick, as I had parked on a 
steep downgrade and the dipstick reading would be wildly inaccurate.

- Left side of the engine compartment, and rear of engine (injection 
pump, timing belt) completely unaffected by oil spray.  One modest 
sized drip on the alternator, one small spot on the battery.

History:
--------
Less than 10,000 miles on rebuild.  Oil and filter changed every 3000 
miles or less.  Oil and filter changed less than 500 miles ago. 
Bosch or Mann oil filters and Castrol GTX 20/50 oil used exclusively. 
Engine has run smooth, strong, and cool since purchased last 
February.  No noticeable leaks in the filter area previously.  Engine 
has consumed little oil since purchase, averaging less than 1 litre 
added between oil changes.  Most of between-change oil loss due to 
(likely) rear main seal leak, which lightly spots driveway, dirties 
transmission/motor mating area, and speckles rear hatch with oil 
droplets on highway speed drives.  Engine will push bus to over 65 
mph, and can cruise at 65 mph on level ground comfortably.  I always 
cruise no faster than 62 mph, usually a little slower.  I never push 
the bus up hills, preferring to fall back to either 38 mph in 3rd or 
22 mph in 2nd to avoid labouring the motor.  (Remember, this is a 
diesel transmission, so gearing is lower than in gas-powered 
vanagons).
-------------------------------------------------------------------------
Tobin Copley        Bowen Island, BC, Canada      49deg 23'N-123deg 19'W

'82 Westfalia 1.6L NA diesel ("Stinky")
'97 son Russell                                   =============
'99 daughter Margaret                            /_| |_L| |__|:| clatter
1995: 'Round US, Mexico, Canada 15,000 mi       {.            .| clatter!
1996: Vancouver to Inuvik, NWT   7,400 km        ~-()-==----()-~
Previous buses: '76 westy deluxe (Daisy), '76 westy standard (Mango)
http://www.sfu.ca/~tcopley/vw/