Based on the oil usage it does sound like the engine is getting tired.
BUT even so, an engine cannot go from starting easily to not starting at all due to low compression with such little warning. Compression loss is a gradual process and you would see the engine get progressively harder to start. It wouldn't go to zero literally overnight like you are describing, on an engine that ran OK the day before, even if it did show signs of wear.
What this sounds to me like is a TIMING issue. That is almost the only way sudden loss of starting ability can occur. You already took the good steps of confirming fuel delivery to the injectors and functional glow plugs. Assuming it has fuel and glow, then what you are almost certainly dealing with is a slipped timing belt or spun crankshaft timing gear (very common if correct torque spec is not achieved on the front crankshaft bolt).
Sounds like you already have a better/stronger engine to swap in so might not be worth the effort with this one anyway, except as a possible rebuildable core for the future as you say.
But if you do want to investigate it further, best course of action is probably to check camshaft timing and injection pump timing (in that order) with engine set to TDC. Greenbook gives good procedures for this or you may already know how.