An update for anyone who was interested in this and may be interested for future reference. I am an Alfa enthusiast, I think.., so I persevered with this issue and mystery...
I decided to dig deeper so pulled the heads off, as you do. Upon inspection of the rings found them worn, pistons looked to be ok but evidence of oil flowing into the cylinder and into heads. Cylinder bores looked pristine, shiny with cross hatching visible. Pulled apart the head and upon inspection found massive amount of oil and gunk build up behind the valves and face of the valves. Also pulled the main bearing caps and inspected the main bearings which were ok, no sign of excessive ware or marks. Pulled the big end bearings off and found them to be excessively worn with score marks (not good) The bearings have a coating which was missing. Crank shaft had no signs of ware, luckily ! So.. decide to buy new head gasket set, piston rings and bind end bearings. This was actually quite reasonable price wise (about AU $ 400). Note I took a bit of a gamble with the rings as I ordered from a supplier in UK who could not supply the Goetze brand so supplied Nippon rings. Much can be said about this but you can ping me with questions, if you wish after reading...
I cleaned all pistons and installed the new Nippon rings. Used piston ring pliers and compressor (eBay $30).
Disassembled the heads, degreased cleaned with brass brush and high pressure hose with combination of degreaser and soapy water then high pressure aired it out. came up squeaky clean. Cleaned all valves and then reinstalled them with new Valve stem seals. Installing is a fun job. I think I spent a whole day just working on the head. Double sprung valves are fun... need a specific tool for this from eBay ($40).
I did all this work while the engine was in the car, removing sump was fun... oil pick up gets in the way as drive shaft block the sump from moving around. like wise re-installing had to loosely git the oil pick up to allow movement then once in place the sump, you can tighten the oil pick up and then fit the sump. You need a person to help with this, got my son to help with this. anyway just a tip here ...
Installed the head following the torque procedure as per manual, that was fun and worked up a good sweat. I really love my torque wrench now !
So... cut a long story short. I installed the remainder of the camshafts, belts and exhaust components, installed all fluids (cheap 15-40 oil) and fired it up !
This was scarey ! first time I rebuild an engine ! (essentially) so I was freaking out a bit so many steps and so many parts !
She started up beautifully ! got it to running temperature and then took it for a drive to ware in the rings (I took the quick burst and engine compression braking approach) much can be said about this.... After about 100 ks I changed the oil and I am running 10-60 full synt. The car has now done 1000 kms since rebuild and has used up zero oil ! not a drop ! niente !
, no smoke, no smell no pollution and no oil consumption !!! yeayyyy !!
So the mystery is no more ! It was the rings and possibly the valve guide seals. Luckily I salvaged this engine before it was too late but boy what a journey !!!
Hope this helps some one out there in the Alfa land !