and when cranking it blows it black smoke.....
While sitting the fuel seeps past the float needle, fills up the bowl and flows into the combustion chamber (and flowing past the rings and contaminating the oil and raising the oil level ) causing a very very rich starting condition.
I'm just going based off of every blown head gasket i've replaced on a small engine, i've never smelled or found oil in the crankcase... now it could also depend on where the gasket blows at as well.
@zippy2 Is the oil above the FULL mark on the dipstick?