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I think it depends on the engine. I know my 1300 did not have a seal. It simply had a spiral cut into it in the opposite direction as the motor would turn, so it scrolled the oil back into the engine.

Jay

I had the same problem with my 1600 VW did not use a seal there but you can buy one it is called a sand seal I used one from Empi works great. Good luck.

I did a little research on the sand seal and I am going to try it but I was wondering if I have to disassemble the engine to install one or will just removing the pulley enable me to get to install one?

I also am getting alot of oil coming from the crankcase breather, can that be fixed by tighting the valves?

That sounds like you have worn piston rings (allowing air to pressurize the crankcase and cause oil breather issues.) You may be experiencing blow-by. Have you done a compression test on the cylinders?

That may well be why you are experiencing oil at the crank pulley. When the crankcase is pressurized, it's going to try to get out of there whenever it can

Jay

There was a time you had to machine the block for the sand seal. Today you can buy one that presses in with a few taps from a rubber mallet. Keep in mind you will have to get the correct pulley. Call Danny at CB Performance, He will walk you through it.
As far as the oil though the vent tube goes, Some oil is okay but if it is excessive Jay may be right. Another issue that could cause that is your valve stem guides could be worn. I would lean to the jugs though. The good news is they are relatively cheap and easy to replace if you are mechanically inclined.

Thanks alot guys, you have been alot of help, I have not had the engine pressure tested at this point so that will be the next step I guess.

I don't see a road draft tube which came on the VW engine originally and helped scavenge pressure from the crankcase. There should also be a tube coming from the oil fill to the air cleaner also to scavenge crankcase pressure.
I see to many instances where the stock VW pieces would fix the problem but they have been removed.

Yes it has a vent tube but I had to reroute it to a separte filter because it was fouling out my carb with too much oil.

If that's the case, you need a rebuild.