No way on Earth that car is doing 12's with a smaller pulley.
Remember these are old school twelve valve pushrod engines. Great torque down low and midrange, but no top end. Rated 240hp stock, most are lucky to get in the 14's. You can't just throw a small pulley on there and call it a day (unless it's a minor change), it requires supporting mods to keep detonation / preignition in check, unless you like blowing engines up.
I had an '00 Bonneville with the L67 Series II and with headers, cat-back exhaust, high ratio rocker arms (1.9 to 1), stiffer valve springs, high flow fuel pump, 1.4" pulley (which is about the smallest you can run reliably without serious engine work or S/C upgrade), dyno tuned and I barely broke 240whp. Don't get me wrong, 350lb-ft torque at the wheels makes for a seriously snappy FWD car and great rolling burnouts, but no way you're getting close to 12's even with a W-body, without a ton of work and $.
Back on topic, I'd try the oil pressure sender first, it should be inexpensive and easy to replace. But checking oil pressure manually would eliminate any guessing or throwing parts at it. I don't think you're going to be able to read oil pressure through a cheap OBD2 adapter, mine has never shown that, but perhaps more expensive scanners might.