Couldnt find anything similar to my issue on the forum (least from what I searched, so apologies if a thread does exist).

I was putting around with old ye' faithful (1992 XTRAcab with 22RE/4spd auto) and noticed an odd smell coming into the cab. Had checked the engine with dad and he told me when its in Park or Neutral she looks fine, but when in Reverse or Drive gears white smoke comes from the engine. My dad has always been confused when it came to this truck (he likes GM), so Im looking for suggestions and thoughts/opinions form the forum.

Motor swap? Head gasket? She burns oil (one liter every 2000km) which isn't the end of the world. My bestie has a similar truck (1994 with 3.0 V6) and knows very little on this engine. Again, thoughts and opinions always welcomed.

 

Can be anything from condensation in the exhaust to a busted head gasket. Nothing problematic really - HG is doable with the engine in the truck, in a weekend going really slow. A pro can do it in 4 hours.

When you place it in gear, the engine works a bit harder. Suddenly problems can show up.
I think first, do a compression test - verify that each cilynder is still sealing correctly and the valves are doing what they should.

Then, verify that oil is oil and water/coolant is water. They should never mix. If you see oil that looks like milkshake: probably headgasket.
Describe the odd smell. Sweet?

 

Put your hand into the "white smoke." Does your hand get wet? Oily? Sooty? "White" smoke is usually water, but start by checking. Then as ev13wt suggests, check the oil for water (lots of water looks like a milkshake, a little will leave "bubbles" of water on the dipstick), and the coolant for oil (let it sit for an hour, and if there's oil it should come up to right under the radiator cap). Then move on to the more labor intensive tests, including a compression test.