One problem related to engine has been reported for the 1996 Subaru Legacy. The most recently reported issues are listed below.
The front crank seal started leaking for the second time at approximately 102,000 miles. The original seal starting leaking at approximately 44,000 miles and was replaced under warranty at 59,195 miles. Heavy smoke and a strong burning odor is emitted from the sides and front of the engine area. In addition, smoke will be emitted from the center dash hvac vents. The car just failed PA state inspection on 11/1/01 as the seal is leaking badly and is considered a fire hazard. I contacted Subaru of America via email on 10/2/01 but have not received a reply. I contacted them again on 11/1/01 and 11/2/01 but still no reply.