I am the originator of this thread so I thought I would give you an update. I have been driving my car for over a year with a slight oil leak and it recently passed inspection with the same leak (different garage).
The technician that passed my car said it would take a mist of oil and not a drip to start a fire and the conditions would have to be just right to ignite it. He said that it is left up to the judgment of the technician as whether to pass it or not.
To me that sounds stupid but they can reject it if they want to. I fought it last year and won because the owner of the garage and not the technician was the one who gave me the OK sticker. I guess because I did all the research about the inspection checklist that the owner didn't want to get into an argument about it, so I won...that time anyway.
Here is a good article about resetting the "check engine light":
http://www.smogtips.com/check-engine...urn-on-off.cfm