Join Date: Jan 2002
Location: Strawberry Fields
It could be just the headgasket, but if you may recall, the 2.7's have an oil sludge problem and looks like you found it. Luckily, you found it before it's too late and the engine's dead, so now would be as good a time as any to have your oiling system flushed with a machine (I personally like Pep Boys' Bilstein oil flush service) and then inspect other parts. The compression leak could be the headgasket, definitely.