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The "Modulator" screws into the back of the tranny. Sometimes they fail and allow ATF to be sucked into the Intake manifold via that steel / rubber line shown in your photo. When that ATF burns out of the tailpipe, you will swear the car is burning oil.
Hi... No it wasn't when I got the car but certainly is now. Very observant
Is the distributor vacuum hooked to full manifold vacuum or ported vacuum? I changed mine from ported to full vacuum, and retimed the distributor. It made a lot of difference. What engine do yo have?