The reduced diameter stovepipe will prevent your upper intake manifold from eroding from the heat, breaking through into a coolant passage, flooding out and possibly hydro-locking your engine, or rusting our your rod bearings like dozens of L36 cars here already have suffered.
I have some pics I need to upload of the EGR stovepipe area on an L36 upper intake manifold manufactured in 2002. It'* already starting to fail.
The oil is coming from the PCV system. Positive crankcase ventilation. As combustion gasses leak by the rings (small amounts) they pressurize your crankcase, resisting the downward motion of the pistons, and reducing efficiency. The PCV valve redirects these fumes, including some oil mist, back into the upper/lower intake manifolds where it can be burned off.