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I've seen a bad fuel pump cause this. Gas gets pumped into the crankcase, ignites, ballooning the valley pan, valves covers and even the oil pan. It you're running a mechanical fuel pump you may want to take a look at it. Does your oil smell like gas?



Now that would have to be some fuel-rich oil to do that !! PLUS ... oil diluted that badly .. the bearing would be hurt by that fact.