My 1990 Nissan Sentra XE sounded out of time, so when we got a mechanic to look at it, he said it was all in time but he found oil in the distributor. We bought a new distributor o'ring and he said that it would fix it. Does this sound about right to you?

Yes, if it's the O-ring on the end of the distributor shaft. Be sure to coat it with clean engine oil, prior to installation.

No, if it's the large distributor cap O-ring. This O-ring is used to keep moisture out of the distributor.