Compression is normally either lost around the rings or past the valves
(although in Vanagons you can sometimes loose it into the coolant system).  As
the rings wear they could stick to the piston and allow combustion gasses to
pass by them and allow oil into the combustion chamber (hence bluish smoke
when rings are bad).  Valves could become caked with carbon deposits and this
could prevent them from closing all the way and allow combustion gases to leak
out past the valves (also could allow oil into combustion chamber and bluish
smoke results).  How to test to see which is causing the compression loss is
fairly simple.  Put a tea spoon of oil into the combustion chamber through the
spark plug hole.  Now do your compression test again.  If the numbers come up
then it is the rings (the oil temporarily makes a better seal around the
rings), if the numbers stay the same then it is the valves.
Ken Wilford
Van-Again
John 3:16