I just went through this for the second time on the day before yesterday.
About 3 weeks ago...driving home from school for the weekend...about a 90 mile drive down the highway. I get to town and get off the highway and i smell burning oil....didn't think much of it as some ragged out POS was sitting next to me. I got home and sure enough I smell it again and see smoke this time.....oil filter adaptor o-ring was SHOT....solved my problem of oil "seeping" from somewhere that had been occuring for about a year....no more oily transmission pan and bellhousing untill this week.
Fast forward to Wednesday of this week. I'm driving around in Charlotte...about 30 miles away from my school in an area i am not at all familiar with. I get stuck in heavy stop and go traffic for over an hour....lots of gear changes b/w first and second...cooked the brakes (almost completely...smelled them burning). Anyways, I finally get through the mess and get back up to highway speed for about a minute before my exit comes up. I proceed to slow down and the minute i let off the gas i hear and feel a very loud CLUNK....almost like tranny related, it came out of over drive REALLY hard. I glanced in my mirror and there is a hell of a smoke show behind me, and I can't even see the vehicle behind me...all I saw was there head lights.
I pulled over immediately and cut it off thinking i had seriously blown something major....once again, just like with the oil filter adaptor, everything underneath the Jeep is covered with oil...tranny, tcase, rear axle..etc. I managed to get it back to school after letting it sit to cool off for about an hour or so...and i'm hoping i can get it the 90 miles back home tomorrow to my good tools and shop and start looking it over better.
Right now i'm fearing rear main, but it's been a year and a half or so since i've changed the valve cover gasket....and i'm really praying that it just needs to be changed again, and it's leaking from the back of the cover.
Total milage on my Jeep is about to hit 88K.
In this latest show, I checked the oil and it was not registering low at all...still showed 6 quarts....so i'm thinking it just dumped a bit real quick, just enough to make ALOT of smoke.
So what i'm getting at here is, a leaky valve cover gasket (very easy to change), a bad oil filter adaptor o-ring (moderately easy to change provided you have a good T60 torx bit), and a bad rear main (which is not so easy to change compared to the other two) all show the same signs of a leaking rear main. And all three are very common on the 4.0.
My advice to you, take it to a do it yourself carwash (or if you have a pressure washer) and wash the hell out of everything underneath the jeep, that way you can begin to track down the problem.
As mentioned before, the oil will run down the bellhousing and hit that portion of the exhaust pipe that is right there...so thats where your "burning oil" is likely coming from.
One more thing i'll add is right before my oil filter adaptor seal let go, I noticed some oil on the bottom of my filter...so you might check there too.
And for the record what are we talking about here? Meaning what year is your Jeep, assuming 4.0, milage..etc etc.