I hope this is not it,  I think your engine is kinda toasted.
There's 'some chance' it's a breather problem, but I kinda doubt it.
Minor chance that some head work could help it, but I don't have a lot of
hope for that either actually.
I think you're right to be thinking about rings, or more likely a rebore and
new pistons. 
Did you check that the breather holes in the intake manifold are not clogged
? 
Blow by is supposed to be drawn into them and burned in the combustion
chambers.
If the amount of blow by is overwhelming, it'll end up in the air filter
area.
You can dumb blow by overboard if it's excessive - not environmentally
correct of course ....
But that's one low-tech 'solution' to deal with excessive blowby, but in a
diesel, with very high compression ratio.......serious blow by is going to
be excessive, if there's a ring problem  just like you have. 
There are other possibilities besides rings/pistons/cylinder bore, but
.......it doesn't sound very good, sorry to say.  It does sound like it
might be a diesel westy with a 1.9NA that needs a rebuild.  
 Are you on diesel vanagon , the yahoo group ? 
More diesel focused there than here.
Scott
www.turbovans.com 

-----Original Message-----
From: Vanagon Mailing List [mailto:vanagon@gerry.vanagon.com] On Behalf Of
Michael Sant
Sent: Monday, November 26, 2007 7:25 PM
To: vanagon@GERRY.VANAGON.COM
Subject: vanagon 1.9l diesel oil blow by in air filter issue?

Hello everyone, I just joined this list. I just bought a 82' diesel  
Westy with an upgraded 1.9l in it, non-turbo. I bought it off the  
samba classifieds from a guy in Albuquerque, NM for $6500. This  
seemed like a fair price after talking to the guy at great length,  
but after driving it home to Portland, OR. I am second guessing it!

So, when I bought it, the seller had messed with the main crankcase  
breather hose and smaller hoses that come off of the intake. He  
installed a 90� elbow into the top of the air filter casing and ran  
this large diameter hose right from the bottom of the engine  
crankcase directly into this elbow. He had also experimented with  
running this hose into a T which he placed in the middle of the  
smaller diameter hose coming from the top of the engine off of the  
intake. He said that this wasn't working, that maybe the hoses were  
too small in diameter. So he then put electrical tape on this little  
breather hose and routed this large hose into the airbox.

As I was driving home, I was keeping the oil pressure gauge at 3-4  
Bars and the oil temp between 100-130 Celsius. I kept my speed to  
55-60MPH on the highway. I was told that the gauge was reading slower  
than actual by about 4-6MPH. I had many hills along the way through  
Colorado and Utah and was often above 7000 feet. So, after about 100  
miles into the trip, I got gas and noticed I was about 3/4 of a quart  
low on oil, I topped it off with the one gallon that the seller gave  
me (he said I would need it!). After driving further, the next tank  
of gas, the oil was about the same 1/2 - 3/4 of a quart low. So, I  
had good power but the oil temp was remaining a bit high. I made it  
all the way to hood river, OR and the oil pressure was dropping, I  
pulled over and added oil. Drove another 100 miles or so and it  
dropped again, this time I pulled off and opened her up. The oil was  
very low and we noticed this large breather hose routed into the  
airbox, this seemed wrong, so we opened up the air box and there was  
all of my missing oil! It had been dumping it into the air filter  
box! So we sopped up all the oil, and capped off this hose with a  
screwdriver, aimed it at the ground and drove home. When I got home,  
the oil was low again and it had been blowing out the oil dipstick  
tube, the dipstick tube was not fitting tight, so I installed a  
larger o-ring.

So, then I took it into a shop and had them look it over, they said  
that maybe it need the valve and cam cleaned and maybe it needed a  
better breathing valve cover. So they steam cleaned her valves,  
changed the oil, filter and air filter. (it had a cheap autozone oil  
filter on it!) and $89 later I picked her up.

So I drove it around town lightly, but giving it some gas, drove for  
about 15 miles and under 50MPH and got home and the airbox was again  
filled with oil!

So, now I have it a a very reputable shop in town and they are  
scratching their heads about how these breather hoses actually go.  
Since this was not an engine typically installed in a Vanagon, and  
since it was done different ways depending on usage and wether it had  
as turbo, it is very confusing about how this needs to be resolved.

Here are my ideas:
1. clogged or bad oil pump allowing too much crankcase pressure to  
build up
2. has wrong 1.6l valve cover and needs a 1.9L style one with a more  
robust oil breather/filter cap
3. needs better oil breather tubes
4. needs an add on crankcase oil filter/breather like the Mann  
ProVent 200
5. needs new rings, (yikes I hope not after paying what I did for her!!)
6. ??? Your ideas?

Sorry, for the lengthy description, but no one I take it to seems to  
have a clear answer about how exactly these hoses, especially the  
large one coming from the crankcase, are supposed to be routed.
So, have any of you ran into this problem? If so, what did you do?

Thanks so much for your time!

Signed,
Sad Biodiesel Westy in P-Town
Mike