It suggests a head gasket leak. I've seen that one the 350F and 400F before. The head gasket is/was impregnated with adhesive (not unlike rubber cement) throughout, and this design relied on that goo to seal things up. It's just gotten old now, after 50 years of working without pay nor respite...
The hard part of fixing it: modern head gaskets are 0.010" thicker than the one in the engine now. This means that when the head gasket is replaced, the cylinders must also be decked -0.010" to make up this difference, lest this leak return within 500 miles again. The oil seals that sit over the oil jets can't be had in longer sizes (unlike the O-rings in the larger Fours can) so this is the only 'fix' I know (and it works) for the Baby Fours during rebuild.
The bad part about that: once the cylinders are pulled off the pistons, DO NOT DISTURB THE RINGS or the engine won't be happy at all upon reassembly. And, whatever you do, DON'T "replace the rings and hone the cylinders" as this WILL GUARANTEE massive oil burning, and often also big oil weeps that the head joint. Either plan to rebore to bigger pistons and use 0.0004" (that's not a typo) piston-bore clearance, and find a machine shop who won't balk at it, or gently pull the cylinders, have the top milled down 0.010" and install new gaskets, and don't turn the rings on the pistons: leave them alone and reassemble them just as they are. Don't clean the carbon off the pistons, either: it doesn't hurt anything.
