cps acting fishy

[f00g00]

If there is oil inside the CPS then it can coat the parts and mask some of the signals so yes oil inside is not good. You can clean it out with contact cleaner fire it up and see if it gets any better, then you know the wires are good and you can just replace the seals from toyota.
If it still runs like crap then troubleshoot with this link,
http://www.cygnusx1.net/Supra/Librar....aspx?S=IG&P=3

or this
http://www.cygnusx1.net/Supra/Librar...aspx?S=IG&P=16

read the wires from the CPS to the ECU with this to ensure the engine harness is good.
http://www.cygnusx1.net/Supra/Librar...px?S=Main&P=40

here is an exploded view of the CPS
http://www.cygnusx1.net/Supra/Librar...aspx?S=IG&P=21
Make sure the O Ring is good. You can probably go to NAPA to get a replacement. It just prevents oil from leaking out onto the block. Since your CPS is internally leaking then the inner bushings might be shot.
Ive never taken one apart but my mercedes distributor uses the engine oil to lube the inside of the shaft and there are inner bushings and seals that go after a long life. The dealer says to replace the distributor, I had a mechanic fix the bushing. he replaced the seal with a new one and added a little piece of felt to catch any oil that got by and it would go out the weep hole and not sling all the parts inside.
I have injector triggers in the distributor which got gummed from the oil.

Don't forget to reset the ECU by pulling the EFI fuse or the code will stay stored.