I agree with you and the others that diesel in the oil is likely. Current owner of the tractor said that the oil hasn't seemed low and he hasn't had to add oil. So the only way the oil would be significantly higher than "full" is added diesel.
I need to check smell and compare oil in the tractor to "good" oil to see if it feels different. But, I didn't notice any smell before.
I need some clarification on what "blow-by" is: my understanding is that it's exhaust gas during/after combustion goes past the rings into the crankcase. So the gases coming out of the breather should smell like exhaust. One would also think it would be white, like what's coming out of the exhaust pipe. I took the breather cap off and put my hand over the opening and it seems to build pressure the longer I hold it there, but when I take my hand off, there's no smoke or exhaust smell at all, just some "clean" oil spritzed on my hand.
Is that right?
If so, then it appears that it's unburned fuel and blow-by, because building pressure would seem to indicate that something is adding to the volume of the crankcase--unburned fuel, etc.--just doesn't seem to be exhaust. And it has white smoke and is rough running, meaning bad compression or bad injectors.
Worst case scenario is then a new injector pump, new rings (engine rebuild), reground valves/valve seats or a new head, and new seals all around. That about right? Just $2500...:thumbsup: