Yes I do think the oil smells of fuel.
Ok. Look back at what I said originally.
Yes I do think the oil smells of fuel.
Which carb do you have on that 4.3? 2bbl or 4bbl? Is the choke opening all the way? (must be an electric choke). Your plugs look very good except that one, so I'd be surprised if you have fuel dilution in the oil. About the only things that would cause fuel dilution would be a choke that does not open (but then we'd expect all the plugs to be black) or a sticky float/leaky needle valve that is allowing flooding. I do recall hearing that the 4bbl Webers that Merc used in some years were prone to that.