1260 massey with iseki 3 cyl. engine

[jeeps567]

hi guys....i am new to this sight. well here goes nothing. just rebuilt a 3 cyl. iseki engine in a 1260 massey. engine runs great. before i rebuilt engine the owner ran it allmost out of oil and also over heated engine. i rebuilt engine. engine has 45 psi oil with stright 10w oil. my problem is a little water in oil. had head magnafluxed. engine shop said no proble with head. what are the chances of the oil cooler going bad? should i have put sealent on head bolts? does this head have water cooled fuel injecter sleaves? this engine is a dry sleave engine. thanks for any help neil