What is the problem?

Sure smells that way, don't it? Or, maybe just a valve job and call it an "overhaul"? :>)

Allan

Once you lose that rust inhibitor in your cooling system it will work on freeze plugs
and probably on sleeves too. Permanent doesn't mean forever. Drain and flush the cooling ststem
and install new antifreeze every other year. Hal

That being said, somewhere between the combustion chamber and the cooling system is where the problem lies. My thought is that if it were the oil cooler, there would be oil in the water since the cooling system runs at about 15 psi and the oil system runs at 60 plus psi.

You have checked the head, how about the block and where the sleeves set into the deck of the block? Lay the gasket on the block and then look for areas where the compression gas still has access to the surfaces of the sleeves and block and check those areas closely for cracks or signs of compression sneaking by. It is also possible that there is a crack in the block or a sleeve or where the two meet that may not be seen by the naked eye. Remember, the pressures inside the combustion chamber exceed 100 psi, and the cooling system less than 15 psi, which can in theory allow compression gasses into the cooling system, but not necessarily allow water to pass through.

Another thing to check is for stretched or weakened head bolts that are allowing the head to rise up a bit allowing the leak.

You have a tough one here since it appears you have already checked the most obvious places for a leak. Please post back when you find the answer.

Those things are notorious for pitting the liners. Did they put new sleeves in when they "overhauled" it?

Allan