What could happen to a knackered engine?

What are the consequences of driving an engine that is close to packing up? I think my engine could be considered on its last legs, however, it still drives at the moment and I use it for small errands. Am I stupid to continue driving it as I try to tick jobs off on it or should I be very wary and steer clear of using it until I have addressed some of the symptoms?

Will it get gradually worse until it is not worth driving or is something catastrophic likely to happen?

Always carry bus fare.

it will probably go from rebuildable to not

If it's an old series engine they seem to rattle on until something finally breaks or they just start burning more oil than is acceptable - my last one finally died when the timing chain tensioner cog broke up. No other serious damage but the bores were so worn it wasn't worth rebuilding.

It's been going through oil (both spitting it out from the engine and probably burning it too), smoking slightly and never really clearing, loss of power, struggles to turn over etc. I just bought a compression tester and put that on it and got the following:

Cylinder 1 - 130psi
Cylinder 2 - 66psi
Cylinder 3 - 121psi
Cylinder 4 - 137psi

I think that indicates quite a sickly vehicle doesn't it?

Yes.

So what are likely worst case scenarios for valve problems or blown head gaskets?

I guess it is to the old boys credit that he has still been driving around as well as he has when I look at those compression figures. I am just trying to get the owner up to speed quickly enough to do him justice and keep him going for another 40 years