That makes sense, the "stored in ultra oil" sound like it was submerged and I have run into a couple guys who have stored engines that way (I don't question it I just nod).

Low power and low compression with a lots of smoke either a stuck ring or an intake valve that is not sealing 100%. The problem in trying to figure out which is that both paths lead to the crankcase and ultimately the carb. In either event you need to pull the head to look at the valve seat or to pull the piston. I don't know of a way to free a stuck ring other than to pull the piston and clean the ring groove. I'd pull the head first and check the valves for sealing and then if they are sealing properly go ahead and pull the back plate off and remove the piston since you are already half way there.