Did you (or the previous owner) forget to install the lower guide dipstick tube into the block?? It goes into the block dipstick tube location before the upper tube is inserted. Its function is to guide the stick down into the pan past the crank and main cap. If it isn't there the dipstick will try to curl either up towards the crank or down and out towards the pan side.
Commonly lost or left out part at rebuild, it is basically just a piece of 5/16" fuel line about 7" long with the flare still on the upper end to keep it from falling through into the pan. The factory piece is slightly larger than 5/16" to fit tighter in the hole, but 5/16" works fine, the upper tube holds it down and tight.
That is a great point. Actually looking on the internet before you posted and it seems like all the pics of SBC rebuilds, oil pan gasket/oil pan replacements etc do not show the lower dipstick tube (at least ones I found). During my recent rebuild I stopped by the engine shop a few times and don't recall seeing the lower tube at all !! And it is a good possibilty the previous owner did not install it and then when I got it rebuilt the engine builder did not think to add one
What frustrates me I mentioned an issue with the dipstick but I guess he forgot to look into it. Is my only option is to pull engine/drop pan or is there a way to live with it ???
Just got your post Cobalt....
IF the tube that protrudes down into the sump (inside the pan, guides the stick past the crank/caps and points it downward) was badly bent or worse- missing/broken off- the stick's natural tendency to bend could cause the variation in readings.
I guess I am out of luck...does everyone who fogets or missing the lower tube drop their oil pan for a fix ?
UPDATE: Just pulled out pics that the engine builder provided me (prints not digital...old school) and the assembly pics do show the lower tube however it appears to be really short...maybe a few inches. I will post up a pic.