I have had 2 things happen to my 2.1 that cause your symptoms, neither of which would I wish on any Vanagon owner. 1.) a head/case bolt gave up -- corroded right thru., and 2.) a crack developed between the valve seats on the head, pumping coolant into the combustion chamber. Hope your problem is less severe than either.
 
Jack
'86 (Go)Westy Weekender
'05 Jetta diesel wagon
 

> Date: Sun, 17 Jul 2011 13:43:03 -0700
> From: beeceetee@GMAIL.COM
> Subject: Ohh those VW gods...billowing blue smoke.
> To: vanagon@GERRY.VANAGON.COM
> 
> So I just finished climbing a short hill and felt the power of the 2.1 in my
> Westy decline slightly...a heard a honk and then saw people from the
> sidewalk staring. I glanced out the rear view mirror and there was a very
> large cloud of bluish smoke behind me. I quickly pulled over and turned the
> ignition off. Nothing leaking - oil or water but the coolant refill tank
> was bone dry - previously at the max level a few days ago when I checked.
> The smoke smelled of burning oil.
> 
> I quickly restarted the motor just top see if I could see or hear anything.
> Motor sounded fine but was blowing blue. The temp guage was fine throughout
> this ordeal. Anyway just about to get her flat bedded to a shop for repair.
> 
> Theories, thoughts, words of wisdom?
> 
> 
> 
> BT
> 
> Freshly painted 86 Syncro Westy.