BAD....not good...engine is worn and need of some rebuilding. Could be just the top end, but may also be your rings. Either way, you are looking at taking it apart. Since you have to get into it, my 2¢ would be just to rebuild the whole thing and start fresh with all new parts, especially if you plan on keeping it for a long time.
If it's not burning too much, just keep topping it off until the inevitable day comes when you either need to rebuild it or upgrade to a TPI V-8
If you and your brother in law pull the engine, get it rebuilt, and reinstall, you are looking at 3K before the smoke clears. It should cost you 2K for the rebuild and another 1K for peripherals (hoses, clutch kit, other stuff you find wrong) If you get it done at a shop, the labor will probably double this.
Check the compression and find out where you really are. Do some searches on how about compression test. You can try running some sea foam or something to clean the engine. If your compression numbers are bad, you can try and big can of restore.
After you do a compression test you will know just how bad it is and if you can live with it awhile or if its time to rebuild . A guage is like $25 if you don't have one and takes like 30 mins to do it.
I am an optimist - so maybe you just have a leak somewhere? I agree with the suggestion to check compression, this is good info to have for many reasons. If in doubt, do both a wet and dry test (search for def).
My point on leakage is that many older 2F engines leak. Front main seals, rear main seals, oil pans, side covers, oil galley plug. Most of these are fixable.