Smoking honda

[numbnuts240]

As a wedding gift for a friend, my buddy and I told him we would fix up his honda and sell it for him. It's a 1996 accord with the 2.2l sohc vtec. This thing smokes like a chimney. White smoke with a strong fuel smell. It had an egr code.
We changed oil, new plugs and wires, new cap and rotor, new pcv, replaced egr with a supposed working used unit. Compression numbers are
1 - 180
2 - 155
3 - 180
4 - 180
Leak down test of cylinder 2 produced audible air noise inside the engine. We pulled the valve cover, blocked tell oil return passages and did the test again, noise was dampened.
Also, while doing the compression test we both heard a loud pop under the valve cover between cylinder 1 and 2. Did the test, compression on #2 was on par with the rest, started it up and no smoke. Retested, popped again, compression back down, and smoking again.
We're confused, anyone have an idea?

[centralcoaster33]

What kind of lifters does it have?

[PapaSmurf2k3]

Strange.. maybe some kind of valve shift?
I'd check the clearances and condition of the springs/guides on cyl #2.

[numbnuts240]

after talking to a couple people more familiar with hondas (basically everyone in our town, except us) we heard two different theories. one was valve stem seals, the other was rings. we don't want to do too much work on it, or spend much more money on it. we just need it to sell, while retaining our dignity (we don't want to band-aid something serious and lie about it), and sell rather soon as...

[centralcoaster33]

Rings was my first guess, but I didn't want to jinx you. Plus you say it popped in, then out and compression changed. So I though lifters, because you plugged that oil return and I think the hydraulic ones use oil or something and it's just not closing all the way. Good luck!