I don't know why it stopped. How do you know the oil was above the pistons? There's quite a cavity in the area around the crank and in the sump. I'm not sure 3 litres above max level would take it above piston height. The clearance between the top of the piston and the cylinder head is extremely small, so it wouldn't take much fluid to fill it. Maybe there was enough engine oil getting passed the rings to stop the oil/diesel mixture combusting, but not quite enough to cause it to hydraulically lock? Diesels are good oil burners though
To get this engine to turn over, it was necessary to remove the injectors: the oil sprayed everywhere.
Regarding how the oil got there in the first place, I found this out today, which may have been what happened to me: when the system is running normally oil is pumped around the engine- main bearings, gudgeons, cranks, rocker shaft, tappets, etc. The oil pumped up to within the rocker cover normally drains down through drainage holes in the block back into the crankcase ready to be pumped around again. Because of the temperatures encountered in the engine some of the oil in the rocker cover is in the form of a mist. This mist is drawn down through the rubber pipe that heads off, ultimately, to the air filter, to be introduced with clean air into the combustion chamber by the turbo.
However, if there is much too much oil in the system it is not a mist that is bled off by that rubber pipe, it is liquid oil, which is then fed into the combustion chamber via the air filter and turbo. As I have just remembered from school, you cant compress a liquid, therefore the engine has no option but to grind to a halt.
I am open to other interpretations and conclusions though, if anyone can offer an alternative.
On the subject of diesels being good burners, I remember an old marine engineer telling me of a ship's engine in the Indian Ocean running on for three weeks after it had been shut down, just burning lube oil from the sump drawn up past the piston rings.