I am getting ready to order stuff. I need to know the following. Is sealant used on the valve cover gasket? Is sealant used on the head gaskets and is sealant used on the sump gasket? If yes, what type of sealant is
required.

Thanks SRT for showing me the correct way to do it. I will get to it today. I looked at new rings vs my old ones for comparison purpose only to see if I detected something that was grossly out of the ordinary. What about sealant? Is any used on any of the gaskets?

Mine after honing and ready for re-assembly:
 
 

On post #16 the compression rings are still on the piston. The ring you see is the upper oil ring IMG07, then followed by the funny looking wobbly ring IMG08 which goes in the center of the oil groove (what do you call that center oil ring - LOL?

I think you have a shop manual, so what are the spec's in there?
 
For instance:
https://hastingspistonrings.com/tech_tip/checking-compression-ring-gaps/ 
 
With that end gap, as you stated, at least the compression rings are worn, by quite a bit and definitly 
need replacing.
 
I think you already have new rings.  Put those in the cylinder and measure end gap (compression only).
It should be considerably tighter..
 
130 PSI is pretty good but the rings are definitly worn and oils getting past them.. 
 
With the new rings, you won't have nearly, (or vey, very little) blow by. 
 
With that said, you should hone the cylinders lightly to get some cross hatching so the rings seat
fully (for maximum life and sealing). 
 
There's really no way to measure the oil rings (to my knowledge) but if the compression ones are worn, the oil rings are likely worn as well...
 
With re-assembly, check your manual about where on the pistons, the ring end gap should be ON THE PISTONs, when they go back in the block...  Usually 180 degrees apart.  
 
Long  story short, I bought a Dodge slant 6 car (about a 1974) from a friend.  You could only drive about 10 miles and then ALL 5 QUARTS of oil was GONE...  And the engine ran great, no smoking either.  The engine bay was COVERED WITH OIL.   I cleaned the compartment to find the leak.  Oil was blowing out the DIP STICK HOLE, period.   Pulled the motor, heads pistons, etc.  Compression rings had 1/4" END GAP...  Cleaned, honed, put in new rings (one cylinder was just slightly out of spec-gap wise).  Re-assembled, no more oil loss/burning, etc.   BIL drove/kept the car for MANY years, no more issues...
 
. 

Oh yea.. Their quite worn..
 
.

Ok, the new rings are on order. Hope this will fix it. Keep you posted! 

Yes, it's normal.  The governor will adjust immediately upon start up. 
 
 
If you have a throttle, full throttle will put even more tension on the carb,
lower throttle setting, slightly less pressure from the linkage..
 
.

Engine is running flawlessly. It's running a bit fast in idle because the throttle lever is not touching the idle set screw even though the throttle control on the dash is all the way down. When I push it there by hand the idle is correct but when I speed up and then go back it won't go all the back against the idle adjustment screw. I will look at it again tomorrow. Maybe something is binding or a slight adjustment needs to be made. But the engine sounds great and runs like a spinning top. Time will tell if my oil guzzling problem has been solved. Thanks SRT for all your help