Well, I've got a 2.3L EFI motor with an automatic transmission. 89 Mustang LX, of course. I've torn down the motor because it was smoking like a freight train and it appeared to have oil coming out of the tail pipe. Well, after taking off the head the 3rd and 4th cylinder have a slight movement when you push on them. The compression on #1 cylidner was at about 250PSI, the rest of the cylinders was at about 200. So, the compression rings are good but it appears I have 4 bad rings. All cylinders have oil in them. The kicker, though, is when I inspect the head the fluid in the ports is pink tinged, and appears to be transmission fluid. I looked around for a vacuum valve someplace on the transmission, as some have a diaphragm that sucks on the transmission and tells it when to shift and what not. I could not find one. Anyone got any ideas? Besides the ring job im doing I also took the head to be re plained, the valves and valve seats redone, and have it boiled out.
in seen vacume modulators go bad on c-6 and turbo 350/400 trannys and they would suck atf through the vac line and into the motor....im not sure if you have one or not
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You probably did NOT need to pull your heads. If you have a 2.3L with automatic transmission, it should be an A4LD which definitely has a vacuum modulator valve and they commonly malfunction allowing transmission fluid into the engine. You are going to have to replace it anyway, because re-working the heads is not going to stop the smoking until you replace the modulator valve. I would take another look at those compression numbers too.
I honestly believe it is a problem with the rings and the vacuum modulator. Speaking of which, where is the modulator located? I have not been able to find it. The reason I think the oil rings are also bad is because I can see the pistons move slightly when I press on them. They should not move. And the reason I am getting the valves done is because since I'm already replacing the rings, bearings, ect. I want the cam bearings re done, valve seats ground, and the valves themselves inspected. I just bought the car so theres no telling where I may find a gremlin, so I'll be going over the entire engine pretty well. I may also have to take in the transmission if it doesnt start acting right after I replace the vacuum modulator. To make a long story short, I want it to be good to me for the next 50-70 thousand miles. Any other suggested checks?
Ooops. Obviously that should have read "head" not "heads". I think that you are making a lot of assumptions and (no offense) it appears that you have little or no experience with engines and transmissions. Since you seem to be determined to rebuild it whether it needs it or not, that's OK, just remember that if you don't replace the modulator valve, it will smoke just as bad and run just as bad as it did before the rebuild.
I dont disagree with what you're saying. Im just sayin I believe it is a problem with both. As I said, you can physically see the pistons move from side to side(with oil coming up around them) when you press on them but the compression is OK. That tells me the oil rings are bad. I think it's burning both fluids. And the reason for the rebuild is because it is going to be a to and from work car for my wife. I dont want it going any faster than it already does, hence no engine swap or improvements. I just want it to run well. The modulator will be replaced.
transmission fluid in the cylinders? 
