Ring blow by...
 

My truck is burning a significant amount of oil. It is definately coming out through the exhaust, since I can see a plume of smoke when I punch it. My questions is, can it be cause by bad rings, or is it most likely a leaking head gasket.

Also, my truck is a 96 ram 1500 4x4 with a 3'' body lift. I've been told I can fit 35'' under it with the right back spacing. Can I use a spacer and keep the stock rims?

how many miles are on it?

LA/magnum engines (actually, Mopar V-8's in general) are not known for head gaskets. Rings and/or valve guides and seals are possible culprits if it is a high mileage engine. There is another possibility, though; The intake manifold gaskets are known to leak oil into the plenum. Just remove the air tube from the throttle body, hold it at WOT and shine a light inside. If you see a bunch of oil inside, then you have your answer.