K&N filters are known to not remove as small of particles as the paper elements they replace because they are too porous.
I have heard the old timers around here say that when Mt. Saint Helens erupted in '81 that the paper element cars got all choked up and siezed on ash but the oil bath cars kept going as long as you changed the oil in the filter every hundred miles or so.
Who cares if some oil gets sucked into the intake? It happens all the time in modern PCV cars and it also happens in two stroke engines. It doesn't really gum up the carb because it gets washed away by the fuel and it is pretty good for the valves and rings if it is a moderate amount (and it would have to be or your filter would run dry in short order). A piece of dirt suspended in an oil droplet doesn't do any harm to the cylinder. Just as many particles get through the fuel filter and into the engine. The oil bath air filter housing is designed so the air takes a convoluted path and any oil that comes out of the bath can't turn as fast as the air and smacks the wall and drains back into the reservoir anyway.
The oil never gets warm enough to get thin. There is a fairly high volume of fairly fresh air moving through it. The air under the hood while the car is moving hardly ever gets over 120 degrees and that isn't enough for the oil to get thin or outgas. It has to be in the 200-300 degree range.
I suspect that oil bath filters really got discontinued because they are more expensive to manufacture than a paper filter housing- you just have to stamp two halves of the paper housing and slap them together.
