I'd leave it sit overnight, then open the drain plug on the oil pan. See if you get water coming out or at least milky oil. Also see if ti smells like fuel... Given that there's no turbo on the old Lanz, I doubt that's the problem.
If it's not a head gasket issue, it's probably a fuel issue. I suspect that it probably blew an injector tip off, perhaps because of water in the fuel.
If there's no water in the oil, put the pug back and start the engine. Open the injector ines one at a time and see which one doesn't cause a loss of RPM or make theengine stagger. The one that doesn't is the bad cylinder. At that point you can pull the injector and look at it. If nothign obvious, swap the injector with one of the others and see if the problem follows the injector or stays in the cylinder... That way you know if it's a cylinder/compression problem or an injector problem. I'm betting on an injector given you have no power, smoke and increased oil level.... IF it's not a head gasket/liner issue... but you should find that the coolant is down and you'll find it in the oil.
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