I am preping a 1985 XT600 Tenere for a trip to Morocco, I have noticed that the oil level drops in the tank if the bike is left standing for a day or two, and having taken off the access plug off the engine casing to turn the engine to allow me to set the tappets and found there was a great deal of oil inside this casing is this normal or has a seal gone some were ?

The reason for the oil draining into the sump is usually a worn oil pump,it can be reached by removeing the clutch cover then removeing the clutch , remove the oil pump disassemble and visually inspect the condition of the rotors if there is no obvious wear then measure the clearences between the inner and outer rotors to see if they are within specified limits.The oil pump is only available as a complete unit costing over £100 in the uk.

the xt doesn't have a sump so it aint gonna drain i there lol. what you want to look at is the basics, wheres the oil going, is there an oil leak anywhere where,
try starting the bike and letting her run for a couple of minutes, then check the oil level, if it back to normal then its ok. there are little check valve that are supposed to hold the oil so when you start her up she has oil where she needs it, you may have a leak past one of these which is causing the oil to drain off a bit. which is usualy the reason you get a knocking sound when you first start the bike cause the oil is getting round. try letting her run and look in the oil tank and you'll see if the oil pump is working or not cause it will be chucking oil round the tank quite fast. the only place you dont get oil in the engine is in the cyclinder, so if shes not smoking and you dont have a leak then the oil is in the engine, if the level comes back to normal after running her for a bit then i would worry.

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