I would bet that the oil is not draining from the cylinder head correctly. Remove the valve cover and inspect the oil drain passages. I have seen them blocked by junk and or the wrong head gaskets. Also some motors have an orifice in the oil supply to the rocker arms. IF this is left out there will be too much oil pumped into the top of the motor.
I have never touched a Shibaura motor. So I am not able to give you a hands on opinion. Your getting oil from the cylinder head. Either from around the valves if the top is not draining correctly or from an internal problem with the cylinder head. Could this engine have been over heated before the first guy messed with it??? I have seen Cummins big block motors have internal cylinder head cracks that will leak oil into the exhaust side of the head. It usually was a crack around the exhaust valve area. So they will blow oil out the turbo/exhaust but not have oil in the cylinders.
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