Desperately need help diagnosing my problem with my 4runner 1994 3,0L Turbo Diesel (1KZT)

Starts fine, but after 1-2mins of idling, rough idling occurs. Lots of smoke from the tail pipe. Looks kinda white/blueish smoke.

Its either bad valves stem seals or worn piston ring according to my mechanic.
We did 2 compression tests and cylinder leak down test.

Leak down test came out --> OK
First Compression tests shows slight lower compression on #2 Cylinder
Second test, after getting engine warm, shows even lower compression on #2 Cylinder.

The engine generally doesnt run as clean as other 4runners, but when warm, its doesnt smoke and runs as it should on higher RPMs. Has hiccking/cheats on low RPMs. Uses oil.


Its it possible that the compression test shows low compression in #2 Cylinder , and it still is bad valves seals? Or am I getting this wrong?

How is your crankcase pressure? A turbo motor if the valve seals go bad would start to pressurize the crankcase blowing back through the seals when intake valve open. Bad rings would also allow turbo pressure to escape past rings and into crankcase, either situation could cause high crankcase pressure and perhaps oil consumption/blue smoke.
Since your cylinder leak down points to a cylinder that would be a clue.
Could be a turbo seal too.

Havent tested crankcase pressure. How would you do that?

The thing is, it starts always. 1-2 or to times a month little rougher than other, but nothing worth mentioning. But 1-2mins after start, you can hear the compression drop a little in one of the cylinders. The so called rough idling with the whiteish smoke. Drops RPMs very little.

Its been like this for over 8 years and 30000 miles... Previous owner got told by mechanic that its fine as it is. Because fixing it would be more expensive than the actual value of the car.

First you need to know the max crankcase pressure allowable. Then you would have to get a tool, or fab one up. Crankcase pressure is measured in inches of water via a water manometer. There may be an orifice required to be placed in the crankcase vent and then the manometer attached after the orifice. You would need access to a shop manual or a mechanic familiar with your engine to determine what you need.
Does your crankcase vent to atmosphere or is it routed back into the intake?
If to atmosphere does it leave any oil on the ground or in engine compartment? If to atmosphere watch the gases that come out while it idles, it is a visible "stream" of vapor, can you put your hand below it and definitely feel a "blowing" on your hand? If so, this is at idle when under load it will be much heavier.
You may just not want to know, as you stated, a mechanic said a repair would cost more than vehicle is worth. If one cylinder is "hurting" say a broken ring/scored cylinder, how much are you willing to pay to have just one cylinder repaired? Or if it is the valve guides, how much are you willing to pay to replace them? It always comes down to $$$ in the end!