That's a pretty common issue on those motors. Yes, you have to lower the Y pipe for clearance. There is an updated gasket available to prevent this problem.
I've never done it myself, but I've seen guys loosen the oil pan and clean up the pan, timing cover and seal with solvent then reinstall it. As far as I know it lasted the life of the car. It's a formed silicone seal so it shouldn't shrink with age. Might be worth a shot.
Make sure your PCV system is working correctly. I suspect crankcase pressure is what causes it to work its way out over time.