I believe the oil was finding its way up through the screw holes and screws in the valve cover. There isn't any sign of a leak between the head and the valve cover since the oil collects in the lip/trough/side of the valve cover. It's probably done this for a while and has gotten progressively worse over time. When I put this engine in the truck, I carefully worked the valve cover holes and ended up with a good mating surface. It's likely the screws were 'snug' but not over tightened. I think the oil just worked through the gaps in the external star washers since that's where the oil is collecting. When I put the 7/32" valve cover gasket and spreader washers on, the original bolts were too short. The valve cover bolts that I removed had star washers on them, so I figured it must be a good idea. Not! There is no sign of oil coming from the oil fill cap. Here's another pic taken this evening. I'm using stainless steel screws and the available light makes the screws look white in the old picture.
Bartamos, thanks for the vote of confidence. I appreciate all the input and advise I get here on the Stovebolt, it's what keeps us all coming back time after time.........
