how bad is this??? found it in my oil pan

You've got some serious issues.

 

I'd do as suggested by JohnP3, Before leaving the Shop..

 

Same here, diagnosing=mechanic, throwing parts at a problem=technician.

 

If the bull gear hasn't been done yet I'd put money on the bull gear

 

My DDEC 3 did that at 1.3 million. There are 2 placers in that engine where roller bearings are located: bull gear and compressor, so everyone's got you on the right track. Checking the bull gear on a 3 is easy: pull the accessory drive pulley off, it's on the right side and drives the Freon compressor and alternator on my truck. 5 or 6 bolts and pry it out evenly. the bull gear is right there. If there's any wobble at all better get that sucker out of there !! If it goes, it will probably mean you have pistons banging off your intake and exhaust valves. Mine turned out to be the compressor, it's a good chance it could be your problem too. Those pieces can flush through the oil passages and drop into the pan. Compressor is cheaper and quicker, and if you're getting oil in the air system that's a ticking time bomb too. Oil doesn't flow too well at -10 \"/