Disaster!
Well, after all that work and $$$ on the engine, and the saga of the cracked oil cooler jacket, and then the feeling of triumph at getting the engine back in, I decided to drain the engine oil. The engine had been sitting on it's pan the whole time, so I had waited to drain the oil until the engine was back on the chassis. As the plug came out, so did about 1/2 cup of water, then the rest of the oil



I knew that that was bad news and that the head needed to come off for a look-see. Another 'Mud member came to help, bringing his handy-dandy impact gun. Without it, I don't know how we would have gotten the head bolts off - 3 of them were rusted in place and I was very relieved that they came out without breaking, though it took a while and lots of penetrating oil. We lifted off the head, and the sight was not a pretty one.
In short:
-2 cracks in the head between valves
-rocker arms beaten hollow at the tips-precups cracked
-one of the valve seats was damaged from cavitation of some sort
The head gasket did not betray any obvious signs of failure. The block was another story:
-two piston tops had clearly spent time beating against something metal, poss. a glow plug tip or precup piece
-wear marks on clyinder #6 indicated broken rings
-cylinder #3 was badly eroded, like the valve seats above it
There seemed little point at this juncture looking at the bottom end of the engine. Though it was rebuildable, I certainly needed a new head, and the costs to rebuild, likely $1000/hole, were beyond my finances. I needed to find a new engine. This was a major setback in a project filled with one setback after another (or are those better termed "learning experiences"?
I then started stripping the engine down and pulled it off. Then I separated the tranny, as i had noticed an oily area at the rear of the bellhousing.