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No if you have filled the engine with (at least 5L) of oil it HAS to be showing a little on the dipstick. The indicator can come on with low oil pressure or sometimes they have a float in the oil pan indicating the vehicle is actually low on oil. I'm not sure where you put the oil into the engine or if the oil plug and filter were installed correctly, but the dipstick ONLY indicates the amount of oil actually in the oil pan. If its not on the dipstick then its not in the oil pan.
Yes! Bad (worn) oil rings will allow more oil than normal to enter the combustion chamber and fire along with the fuel mixture. This is called blow-by and will usually present itself visibly as smoke out the tail pipe.
At this point, a ring job (at the minimum) is probably needed. Excess cylinder wear could require a bore to the next standard bore size (Usually .010" Larger on the ID).
Sounds like your mechanic is pointing in the right direction!
Most probable is broken piston rings. Depends on the sound. Broken piston skirt can cause a knock and oil consumption. A hole in the top of the piston can cause oil consumption and a rough running engine. Depends on the size of the hole how bad it might sound and run. In either case the crankcase blowby would be pretty good. pull the oil filler cap off while it is running and see if you get any vapor coming out. Vapor coming out is really bad. not coming out doesnt mean there isn't excess blowby as the engine trys to burn it. Of course these are extremes and it could be more subtle then that. depends on how much oil is consumbed and how serious the sound change is. I wouldnt take any long trips in it at this point.