The oil cooler is a good spot to check for failure, We dad this in our Box but it was very slight milky stuff on the cap and we could see oil floating in the water. Remove it, fill 1 part with water and pressurize the other side with air. Easy to do and if it's bad, the bubbles will be very visible.
The BIG issue is the oil filter. Water and main bearing/rod bearings don't mix. It really does look like the engine is toast....
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Jon
1966 912, 1976 911
1986 944, 2000 Boxster
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