As for the oil I mentioned, yes I should've said something about this
after buying the house. I purcahsed this house two years ago when it
was winter -- so i didn't notice the oil until I started doing
yardwork about 4 months later. I found out by the neighbor that the
guy would drain his boat and 4-wheeler oil directly on the ground and
just pitch the oil filters in the corner of the yard. Luckily it's
between the shed and fence, so I won't be using this area for anything
other then storage, but I'm planning on digging-up the soil about 6-12
inches deep, digging-up deeper soil not contaminated, and burying the
oily soil with good soil on top. I still won't probably ever be able
to grow anything here, but at least it'll have a cleaner area for
storage. The oil cans I took to a local place the recycles them.

Ringo,
Your idea sounds like the common sense approach, however you must
tread very carefully here. I don't know what state you live in, but
here in washington, and federally under CERCLA (the federal toxic
cleanup law), if you dig up and rebury or move the contaminated soil
in any way, you are actually "disposing" of the hazardous substance
(oil) and then becomming personally liable for the damage. While the
contaminated site sounds small, cleanups can easily run into the six
figure range for larger sites.
If you remove the soil ( wouldn't recommend it personally), have it
disposed of at a proper facility and KEEP THE DOCUMENTATION showing
you disposed of it properly.
The prior owner is liable both for the latent defect, which you should
be able to sue as a misrepresentation under the sale contract, or
liable under an enviornmental statute as a liable party who disposed
of a hazardous substance.
You should be under the applicable statute of limitations in either
case.
Write him a letter and make him pay for the cleanup or better yet,
contact a lawyer to do it for you saying that you are going to have an
environmental consultant clean it up. Most state statutes allow you to
recover your attorney's fees for bringing a "private right of action"
so it shouldn't cost you anything.
Good luck,
David