The oil-in-the-plughole trick is a standard old-time mechanic's test, Peter. It works on the principle that engine oil is fairly viscous, especially when you first put it into the engine (before it warms up, if the engine is warm). It therefore takes a while to be forced past the piston rings by compression pressure, when you pull the starter. This means you can do a compression test, then put in the spoonful of oil and immediately to another compression test. If the pressure increases by more than say 10-15 psi with the oil in there, the rings are leaking. If it is more like 40 psi, which it commonly is with worn out rings, you reach for the spanners.
Just remember not do do something I did a couple of years ago. I was doing the oil trick on an OHV Honda. Those engines have 8:1 compression and therefore take a bit of rotating, especially if you are doing the test with the decompressor disabled, as I was. I therefore used a very large two-handed back-geared electric drill to spin the engine by the flywheel nut. After I got the second reading (the one with oil in the cylinder) my mind must have wandered because I removed the compression gauge from the plughole before I let go the trigger of the electric drill. I was wearing a brand new ODK-logo white T shirt at the time ....
