My understanding is that rags give the oil a lot of surface area to react to the oxygen in the air, and that it's worse than your average oily rag. I'm not aware of it being an issue once it's soaked into the wood (no air in there?) My sister has used it on furniture for years and has never had a problem.
Perhaps most practical idea is to use used motor oil combined with at least 25% deisel gas.
THis has been used by farmers for a century to coat fence posts, and they last many decades.
Some may fuss about some supposed toxins. The only one I would consider would be from the metals from the motor in the old oil, but I doubt that is anything to worry about on the edge of a garden.
One could use plastic to seal off that wood from the soil if desired.