If it is pumping that much oil the rings may very well be stuck. Soak it for a week with ATF and then work the snot out of it. I'm not sure that the oil pressure will improve but I would pull the pan and have a looksee around. You may just find that the pickup is half blocked with sludge. With pressure that low and no lower end noise it may be a blockage. Usually when things get that loose you hear it.
I'm not familiar with Herc engines - what kinds of stem seals did they have? You may be sucking oil in from above. Also, run it a bit and crack the drain plug looking for water. The really smokey pic looks a little white to me.
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Today's Featured Article - Talk of the Town: The Saga of Grandpa's Tractor - by The following saga is from the Tractor Talk Discussion Forum. Someone. The saga starts with the following message: Hey guys I have a decision to make. I know what you all will probably suggest and it will probably agree with me way down inside, but here it is. I have a picture blown up and framed in my "tractor room" of a Farmall M. It was my Grandpa's tractor, of which whom I never got to meet. He froze to death getting this tractor out of the barn to pull a truck out of the ditch before I was born. Anyway my dad and aunt had to sell it at the auction,
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