That motor should run so go back to square one and check the basics, cam and ignition timing; valve clearances; spark *at the plugs*; fuel supply, etc. Test everything, assume nothing. For example, the reason I emphasize checking spark at the plugs themselves is that I've seen plenty of used plugs go bad after being out of a motor for a while. So don't assume that the plugs are sparking just because they're getting fire....
As to fuel in the oil, bypassing the unseated rings is the most likely explaination. But if you're running a mechanical fuel pump there's another possibility-- the diaphram in the pump may have cracked, allowing fuel to leak out of the pump and into the block. There's a weep hole on the pump that's supposed to allow the fuel to leak to the outside of the motor but I've seen bad pumps contaminate the oil on more than one X1/9. One reason to suspect this might be the case is that it occurs most often when the pump has been left dry (like while the engine is apart for a rebuild) because the diaphram will become brittle when it dries out, rendering it very prone to cracking.
Bottom line, if you have any reason to suspect that you're not getting adequate fuel supply to the carb you may well have a bad pump.
And as Rob said, change that oil the minute you get it running to avoid engine damage due to poor lubrication.
Once you get it broken in do another compression test and compare the numbers to those you'll find in the archives here. Hopefully you'll have a happy surprise. Check this link for info on engine breakin: http://www.mototuneusa.com/break_in_secrets.htm