>>
>>
>>>Is there a good way of determining which parts are broken?
>>>The engine is developing good compression though.
>>
>>If you've measured the compression, and found it to be acceptable, then the
>>oil may be leaking into the combustion chamber via the valve guides. 
>>Burning oil while still having good compression usually means that the
>>heads need to be rebuilt/replaced.
>>
>>Wolfram
>>
>>

If your engine is "burning" (instead of leaking) that much oil you should
see blue clouds out of your tailpipe, especially if valve guides are worn.
You can test it as following:

Rev engine for 5 seconds and suddenly release pedal so that engine revs down.
If your engine burns oil or if valve guides are worn you will see the blue
smoke pouring out of the tailpipe. AT the time you let go the pedal the
pistons begin to suck air/fuel from intake as well as oil from anywhere
it leaks into the combustion chamber.