I know its been a while since the update but I have made progress.
Today I pulled the front end off, dropped the pan, from the bottom it looked good there was some metal wear in the pan, silvery gunk in bottom, but no parts in the pan, rods looked in place, but I had water dripping around cylinder 1 around the ring.
Pulled the Head and found lots of water, water in the intake, water standing on all the pistons, Piston #2 had something in it, I am guessing either a piston ring or maybe the valve seat see the attached image. The piston walls all look pretty clean so now the whats next?
I would like to just buy a rebuilt engine but I dont have the funds for that, I would rather not pull the engine and have it rebuilt unless the consensus is thats what needs to be done.
I am thinking replace at least #2 piston and have the head rebuilt. I guess I could do everything but the mains as they require pulling the engine and like a said I would rather not.. thoughts?