is it possible for the oil level sending unit(just above the drain plug) to leak oil? If so is there a gasket or what's it take to seal it. I have never an oil pan of a LT1 to be familiar with them. Any advise!

 

yes it has an o-ring on it. The oil pressure sensor uses thread sealer. At least that's how it is on my 95z,could be different for other years.

 

The oil level sensor has a rubber/steel washer, not an o-ring. The sealing washer probably isn't the problem. The sensor itself is rather flimsy and can be ruined by over-tightening. Anyway, the sensor itself is probably leaking and the only fix is to replace it if you want to keep the function or to plug it if you don't care about it....