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Yes, oil can get inside of the heat exchangers and cause smoking in the heating system. The heat exchangers don't seal to the header tubes -there is a gap between each tube and the heat exchangers - so if there is a bad oil leak oil can get into the HE's through those gaps. Blue exhaust smoke is likely from worn valve guides, but I would do a leak down test to check for leaky rings as well. I suppose if only the stem seals were bad but the valve guides and piston rings were okay you might not see any noticeable smoke at start up. Whenever I've thought about just changing valve seals, I've found loose valve guides too. But I'm sure others have different experience with this.
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