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smilie in place of the real @
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So the oil did not look like a milk shake after all?
And there was no crud in the oil?
I would take the thermostat out and see what happens and I would look for a plugged radiator.
Maybe you caught it before the oil and coolant had a chance to mix and milkshake. That would be good news for your bearings, you never said how the combustion gas test turned out. That may be moot now that you found water in the oil. Pull the head and replace the head gasket.