Only runs when plugs out

'89 Dodge colt 1.5L with 200kms. All of a sudden it stopped idling - still ran but would not idle. When slowing down using compression it would blow a puff of blue smoke (abnormal) when I got back on the gas. Got it home and now it wont start.

Here is the kicker. It will run if I remove plugs 2 & 3. Not if I only disconnect the leads, but only if I actually remove the plugs.
Compression is alright at about 120 - 130psi across the board. Got fuel and spark.

Did find some oil in the air filter but the PCV seems fine and the compression checked out.
I'm really stumped here - any help would be MUCH appreciated.
Cheers