you are missing my point... if you have too much oil, then when your oil pump is running at peak (high RPM's under load) your oil pressure would be high enough so that it could push past some seals in the motor (like valve seals) and burn in the cylinders... hence smelling oil...

but if you oil is low then i am leaning towards something like rings... do a compression and leak down test...
-Keith

p.s. this is the seal you are looking for...