The only reason I think it is more than just a bad stat or circulation problem is the water in the oil. A bad stat won't do that. I also discounted the cracked block since it was fine until the water pump change and pressure wash. Was the engine run enough to get hot before filling with coolant? Or was it filled with coolant while still hot from the torch? Those 2 actions could crack the head or block. A crack would cause those problems too.

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