cpuvis: There is no oil in the muffler, except what is coming from the cylinder.
slomo: Yes, this is the 180 psi compression engine, a Kawasaki FR691V. The ACR does not adjust the timing rather, it temporarily opens one of the valves on each cylinder to reduce the compression...not sure whether it is intake or exhaust. The ACR is a simply weight system that allows a ball bearing to protrude above the normal cam lobe height at low startup rpm, therby bumping the valve open when it would normally be closed. Once the cam speed throws the weight out, a channel opens up to retract the ball bearings so that the tappet follows the normal cam lobe profile. The ACR appears to be operating normally There is no mechanism to retard the camshaft, as it is geared directly to the crankshaft at a 2:1 ratio (4 stroke). The two gears have always been aligned, and I ensured they remained so when I reassembled the engine.
I removed the muffler to eliminate the mixing of the exhaust gasses from the two cylinders, and only the number two cylinder is smoking. This is the cylinder with the hole knocked in the valve push rod pocket (next to the top of the tappet), caused by the bent valve push rod. However, I don't see how any oil coming through the hole is getting through the valve stem seals into the cylinder.
I will look for a shop capable of repairing the valve push rod pocket, if possible, this week. If unable to find, I'll shop for a replacement block and rebuild the motor.
Fyi, here is a link to the hillbilly mechanic video that I mentioned earlier. He repairs a similar problem: bent push rod with the punched out pocket. Provided in case you want to review it to see the punched out pocket I've been describing.
Hillbilly mechanic.