What's the blowby like coming out of the crankcase breather? Sounds a lot like the cylinders and rings are well worn. I believe edb posted the only compresson test specs I have ever seen for CAT engines just a few days ago.
The other thing you should do is have the injectors checked or just take them out of the cylinders and mount them to the lines so they spray out on the ground or straight up. Then open the throttle and motor the main engine over with the pony and look at the spray pattern. Be careful, do not get fuel injected into your finger etc. If you do, go to the doctor!
The fuel diluted oil coming out the side (of the injector pump housing?) can be because the drain off line from the housing is crimped or has been routed back into the fuel line from the tank. Any fuel that leaks around the pump plungers should drain out onto the ground through that line.