I have an '89 7M-GE so I think I can relate. They are bulletproof engines with an Achilles heel, namely the head gasket. Now some background, and then on to your problem.
These engines use oil from the get-go, more or less depending on several variables but mostly on how hard it's driven. An engine in good condition can use as much as a quart/1000 miles, sometimes even more, again dependent on several variables. I managed to go 5,000 miles/quart by using Castrol Syntec 5w50. Although, using an oil this viscous might not be the best way to go as far as using horsepower to pump oil, it is one solution if you live in a warmer climate and don't want to check your oil every time you fill up for gas. Knowing what I know now, I'll probably see if I can find something no more viscous than a SAE 40 (xW-40) that doesn't promote high oil consumption. I'm testing Mobil Delvac 1300S 15w40 presently.
Assuming your engine is almost identical to mine, there is no PCV valve. The crankcase gases are just vented via tubing from the top of the cam covers to the intake track before the throttle valve. If you have a catch can, either they changed the design or you added it yourself. Although this is an unusual design, it has presented no problems over the 16 years I've owned it.
If your engine is using as much oil as you say, it may be due to leaks and/or consumption. Given it's age, there's a good possibility the oil seals on the valve guide bushings are shot and/or the rings/cylinder walls are worn/damaged, or if you're lucky, the rings are just stuck. Assuming the oil seals are good and installed correctly, you're suspicion of the rings/pistons/cylinder walls seems correct.
As mentioned before, you could be leaking oil too. The numerous oil seals in the engine tend to get brittle over many years and start to leak. You leaving any oil on the ground or is there a coating on the back of the engine and transmission?
Finally, an AutoRX treatment is probably in order if this engine is old and has over 100K miles on it. You also just might get lucky and have the rings packs cleaned up and unstuck, and the other oil seals rejuvenated enough to cut oil consumption substantially.
[ January 01, 2005, 02:58 PM: Message edited by: 427Z06 ]