So much to look for and so little to see. Most of the catastrophic failure points are not going to be visible, but look for the usual things like gloppy oil, signs of moisture etc. Expect the oil to be black. Pull the air cleaner and see what the intake looks like. If it's a C engine it's probably going to have a lot of soot from the EGR. If you can start it look for blowby from the crankcase breather ports in the intake. One way to get a feel for condition is to see how it starts cold. It may smoke a little but shouldn't be heavy and should clear up in a few seconds.
On a test drive also look for smoke. It probably has dual exhausts so you can see if there's a problem with either bank. A little black or brown on hard acceleration and at high RPM is normal, but you shouldn't be laying down a smoke screen.
If you really want to get fancy you can check the timing advance on the injection pump by revving it up to about 1300-1500 and depress the bottom of the rocker lever on the side of the injection pump. You should hear the engine change pitch and RPM. If not the timing advance is shot. You'll probably need a screwdriver to push the lever. Use some finesse, I've seen some enthusiastic people break the levers. If it's got more than about 150K I wouldn't be surprised if it's shot. It's not the end of the world, but it will probably need a rebuilt pump.
