I can't imagine a guy pulling an engine out, removing the head, removing the pan, changing a main seal, and still having this result from the scenario... something simply doesn't add up here.

The Allis D17 engine is a replaceable wet sleeve engine... with the head off, and pan off, you can literally pop the rod caps, push the rods, pistons, sleeves right out of the block, swap in new pistons, rings, and sleeves in one work shift... in-frame rebuild kits are available from at LEAST 20 suppliers, they're usually under a grand.  If someone goes through the trouble of opening one up 'for a look', it's silly to not already have an in-frame kit in consideration, as the resources one invests to get IN THERE is significantly higher than getting the kit on-hand.

But let's go back to the original complaint-  Oil leaking out of the spark plug.

Is that oil coming from around the threads, from the junction between the steel housing and the ceramic insulator, or from the cylinder head/valve cover above?

If it's coming from the junction between the steel housing and ceramic insulator, the crimp and seal have failed- you have Champion plugs, remove and replace them with Autolite AC252's.  

(when the crimp/gasket fails, the plug's ceramic insulator will fracture and drop a chunk of very hard stuff, along with a piece of the electrode, into your cylinder, which will dig a huge gash up your cylinder wall, and ram it into the head, punching a hole into the casting.  If you're lucky, it won't bend the rod and break the crank, but you'll be investing in an in-frame kit AND a cylinder head, and Champion simply doesn't care- Don't ask how I know how badly this goes, and how costly this becomes...)

And I hate to have to bring this up, but my daughter called me one day about her car 'making some strange noises'.  She took it to three different mechanics, who all drove it, and said 'nothing wrong'.  She said they looked underneath, all around, and found NOTHING. 

She drove it 4hrs home on the interstate, and when she turned into the driveway, the problem was not only audible from 60ft, it was VISIBLE.  The transmission tailshaft was visible, when it SHOULD have been tucked up into the hump in the floor.  The transmission support crossmember had rusted, such that the tailshaft support and mount isolator dropped 4", with the tailshaft housing riding directly on the FRONT of the crossmember, and the rear driveshaft (it's 4wd) rubbing on the remains of the REAR side of the crossmember.

How it is that ANY shop can have ANY individual with an ASE patch on their shirt, and NOT notice this, is totally beyond me, but the answer is very clear:  What one identifies as a 'qualified' or 'good' or 'trusted' is meaningless, when an obvious problem gets dismissed.  IF the guy is a CASE guy, then he's probably had his hands in an SC, or a VAC, or a  DC, or RC, or L... mebbie a 350, 530, or a 910?  They're all in the same technical realm and operating principle of the Allis... if he was seeing oil leaking out of the spark plug of a 530, would he think that normal?  I wouldn't... a leaking spark plug isn't part of the suck, squeeze, bang, blow process.  This just doesn't pass the simple scrutiny test.

So one thing you CAN do...

Git a big-arse magnet, and stick it to the combustion chamber side of the head.

Go over to your bench grinder/vise area, and gather up all the iron/steel filings from when you were hand-filing that one thing a while back... 

Get 'em gathered up (I use a piece of paper...)  and sprinkle them onto the cylinder head where you THINK there's a crack.

The filings will present a very visible TRACK where a crack exists.

Note-  If you see the filings showing a track, but you don't SEE a crack, that means the crack is under the surface, where you cannot SEE it. 

You can also expose hidden  cracks in machined surfaces by scrubbing them clean, then take a Sharpie marker and 'paint' the surface thoroughly...  then pour acetone on the surface, let it run across... then stop, and let the acetone evaporate.

After the acetone evaps, you'll see that the permanent marker ink will migrate to reveal surface imperfections, particularly cracks. 

BOTH of these techniques work in realm similar to 'magnafluxing'...  but on a poor-man's budget.

My bet is that, if you move that spark plug to a different cylinder, it will leak there, too, which is a bad plug.  Believe me- failed crimps on spark plugs is NOT uncommon... and on Champion plugs, it is VERY COMMON.  

When the crimp seal fails, two things happen-

1) Compression drops... and it has greater effect at low RPM than high RPM (it has longer to leak)

2) The ceramic insulator no longer cools properly... so it overheats, which means:

Preignition occurs... (even if the engine is turning slow, and under a light load, it does!)

Electrode erodes

Ceramic becomes brittle

core fractures and drops parts into the hole....

remains of core spits out into your very dry bean field (or in my case, a boat engine compartment)... starting a fire...

Damage to all those expensive internal parts... and the heartache that ensues.

Bore gauge and micrometer.  To 0.0001", measure:

Diameter of bore 3/8" down from deck:

Parallel with crank

Perpendicular to crank.

Diameter of bore 3" down from deck:

Parallel to crank

Perpendicular to crank

You SHOULD find (on a well-worn engine) that the cylinder bore is wider perpendicular to crank, than parallel.  This is a result of thrust-side wear. 

You MIGHT find that the cylinder bore is JUST SLIGHTLY wider PARALLEL to crank... this is usually result of the piston warming faster than the cylinder wall under load change.

Lightly clean and measure ridge at top of cylinder liner in both planes.  It SHOULD be same measurement, but slightly smaller than diameter of the bore above.  

Apply a precision straightedge to the top of the cylinder liners.  They'll be the same height... unless there's something fishy afoot.

Bring a piston to about a half inch from TDC.  put a rubber hammer handle on the top of the piston, hold the hammer head in one hand, put your other hand on the hammer handle, and push the piston fore and aft, and right-left.  Does the piston move around in the cylinder?  That's the actuality of slop-  a combination of cylinder liner wear, and piston wear.   If the engine was run with ineffective air filtration, you're gonna find plenty of slop... because dirty soil farm air is very abrasive to engine internals.  That same wear winds up in piston rings, wearing the groove lands and ring surfaces.

You will PROBABLY find a hairline fracture in the block deck between the two center cylinders.  This is not a problem.

Fortunately, the Allis wet-sleeve engine is REALLY easy to refresh... it was a beautifully thought-out exercise in industrial engineering both in production, and in future maintenance.   If you have the engine out of the tractor, giving the castings a little touch-up, and reassembling it with the overhaul kit gets it back into service for another three decades swiftly and economically.  It's almost like the Allis Chalmers engineers had been building industrial-grade stuff for over a half-a-century already...

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