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Old 06-25-2010
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Classic symptom of a cracked head or blown headgasket, but since there is an inch of coolant missing, that means the engine has been sucking in coolant as well as blowing out oil into the cooling system.

There may be water, or at least excess moisture, in the cylinders now--and if so it will be rusting the cylinder rings into the cylinder walls.

I wouldn't wait for the new head gasket, I'd pull the head NOW since it has to be done in any case. Examine the head and gasket for damage, and if it looks like just a gasket problem, make sure the water is out of the cylinders NOW and avoid problems with rust and corrosion that may occur after 2-3 more weeks of waiting.

Cracked heads can often be welded, or replacements located from a breaker or a secondhand source (i.e. Sailorman in fort Lauderdale), so repowering may not be necessary if you spend some time on the phone looking for alternative solutions.

It would be unusual to find an engine that could put oil in the coolant (and suck coolant out) that didn't have a head/gasket problem. You'd need to look for any failure points between the lube/cooling systems, most engines just don't "cross" them over at ny other point, although I'm sure some have ways to make that happen.
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