Not very familiar with that engine, but water in the intake transfer port is a strange one.. It could be from a hole corroded through the transfer port wall where the water jacket covers it.. The water jacket does not look badly corroded, but the leak would be in the right side of the picture in the water jacket. I wonder if the water came in from the exhaust port, or a bad cylinder head gasket and flooded enough to get into the intake side and it is drooling out of there.. check the exhaust cooling elbow and look for cracks in the head or leaks around the head gasket. ..
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