oil leak for an engine novice

[mike3311]

My interior is really starting to come together now, it's looking great! It's going so smoothly, in fact, that I was granted a rewards by the gods in the form of a pool of oil on the garage floor.

brief history... I bought the truck 2 months ago. I didn't notice a leak then and the dipstick looked fine. I've been driving it very lightly and working on restoring the interior. I move it into the garage 2 or 3 nights / week to do this, otherwise it's parked on my severly steeped driveway. That might be important, because there's very little oil on the drive.

So the other week, I first noticed about a tablespoon of clean oil on the garage floor after having it parked there for about an hour. I checked the oil, it looked fine, so I denied the existence of a problem. This cycle continued for a couple of weeks until last night when I noticed about 1/2 cup of dark oil on the floor after having it in the garage for about 3 hours.

Here's where I show how limited I am in engine knowledge.

I checked the oil and the dipstick was covered in dark oil all the way up about 6 inches past the full mark. I re-checked it a bunch of times, same thing, so now I'm thinking I don't even know how to check my oil properly. I stick my tounge out of the side of my mouth to think and remember something about the engine being warm so I start it. I then check the oil while it's running (for about a minute) and it's bone dry. So I freak out for 5 seconds, turn it off, and check again... still dry... still freaking out.

Then I start adding oil until I run out (3 quarts) and now it's about 1/4" from the bottom of the stick, still well below the "low" mark.

Not knowing what else to do besides cry, I grab a flasslight and shimmy myself underneath for a look. I'm pretty sure the drip is coming out of the hole in the underside cover of the bell housing (I think that's what it is). I borrowed this pictue from N2Trux to illustrate:



So I'm looking for a plan of action. I guess I should drain everything and refill so I know how much I have and then try to keep it topped off until I can get a real solution together. For that, I have 3 questions: 1. What's the best way / time to check the oil for an accurate measurement? 2. How much oil does a 350 take? 3. What the heck does it mean when the dipstick is covered in oil way past the full mark when the engine is cold?

For the longer term solution. Does the spot of my drip give any cluse as to where to start looking?

Finally, is it likely that I already did significant damage... it seems to run fine.

Thanks for your help (and prayers if you can spare the time)