Use an oxygen concentrator to remove N2, then introduce water through perforations in the cylinder walls and head to use as a motive charge.

Components:

Air intake: using an (zeolite?) oxygen concentrator to remove N2 results in an intake charge that is 90pct Oxygen. Now you only need 1/5th the volume of processed air for combustion.

Cylinders and head: are surrounded by a water jacket under high pressure. Each is perforated all round such that water is constantly seeping in. This seepage is going to be flashed into steam to provide the motive charge for the engine and incidentally lubricate and cool the combustion chamber components.

Process:

Downstroke: Nicely adiabatic combustion of fuel and oxygen. The (very hot) combustion flashes most of the water on the sides and head of the cylinder into steam which pushes the piston down. (ignore that I don't know how to "water" the piston head or valves yet... assume a well-timed spray or some magical process).

Upstroke: Exhaust valve opens and can be left open for quite awhile (since we only need a small amount of "air" for combustion). Eventually the intake valve opens and air is pushed in, displacing the small amount of steam/CO2 left. Exhaust valve closes. Stroke continues to TDC(ish) (this might be a good time to spray the piston and valve heads)

Exhaust/Water recycling: The exhaust (Steam/CO2) runs a turbine until the steam turns back into water. The water is then cooled a bit and recycled back into the waterjacket. The turbine runs the oxygen concentrator.

Lubrication: Lubrication of the piston/cylinder and crankcase is water; the combustion chamber components are always covered with a film of water, therefore both they and the crankcase won't get hot enough to require a higher-temperature solution. There's no oil to get diluted or thrown out the exhaust. Turbocharger etc. have oil-based lubing.

Notes:

There should always be a bit of water left over after combustion; some of this can still evaporate and continue cooling the cylinder/piston during the exhaust stroke. Water jacket pressure is of course regulated proportional to the fuel flow/engine speed.