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Farr 11.6 (Farr 38)
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Well, Presto, the news is not too good. You more likely than not started out with a blown head gasket that has allowed water to drain into the oil passages and that is what is causing your emulsified oil. But while that is the probable cause of the original problem it does not address the current problem which I am going to guess at a number of possible sources of:
Possibility 1- The headgasket leaked into a cylinder allowing the cylinder to fill with water. If the engine tried to crack against the cylinder full of water you can bend a connecting rod and in the worst case damage a crank or crank bearing. One way to test that posibility is to take the fly wheel in hand and try to turn it. It should back away from the compression stroke a little bit before compressing on the backstroke. If you have not done any serious damage you can remove the sparkplugs until you find the flooded cylinder and pump it dry.

Possibility 2: You siezed a pistion. Running an engine with water in the crankcase will provide insufficient lubrication for the cylinder walls. That scuffs the cylinder wall, builds up heat and can cause the rings to sieze. If this happens under way it can do a lot of damage but at the very least it means a ring and bore job. The way to test is that you should be able to feel the free play of the connecting rods when you wiggle the flywheel.

Possibility 3: Seized bearings. Engine bearings hate to run with water on them and hate to sit in water almost as badly. The cure here is a low end job. The way to test for this one is that your flywheel feels welded in place in both directions.

Which ever one it is it will only get worse if allowed to sit. All three are pretty big jobs.

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