Extreme Sludge Problem!!!

Ok I get a phone call from a friend asking me to come out and take a look at his friends 2000 Dodge Dakota, problem is it overheats with in minutes. Gauge goes from very bottom to pegged in a matter of minutes. My first thought was bad gauge. We parked I checked every thing I could think of. About to the point where I start scratching my head when I decide to check the oil level. It is a little low so I open the oil fill cap( its one that comes up like 8in from the valve covers and you can see all the way down) and as soon as I open it i notice a lot of smoke. I get my flashlight and look down and there was so much sludge. No joke almost a centermeter caked on every where I could see and the bottom of the cap was even worse. He says he maintains his truck as in regular oil changes,tune ups ect.. What would cause sludge to build up like that and how would you get rid of it? Its a 4.7 V6 i believe with 150k miles. Would it cause the temp to rise that fast? Had coolant,new therm., elec. fan and mech. fan. The air filter was pretty bad which makes me wonder about his regular oil changes and tune ups. Is there a cleaner or system flush that would work or is this going to be a rip the motor out and rebuild it? Oh and I know its a Dodge but I drive a Mustang and know this site is full of knowlagable and experianced DIYers. Thanks ahead of time.

I wish I had my camera with me. Thats how bad it was.

Thanks you dont think that has any thing to do with the over heating? Even with the smoke pouring out of the filler cap? It wasnt just a little bit of smoke there was quite a bit. And it countinued to come out pretty thick for several minutes. And if the sludge is that thick it could be stopping the "good" oil from getting to the top of the motor. And it has 2 fans, one runs off of the motor and another electric fan. Both are in working order. The truck drove just fine. Started right up,smooth idle/accel/decell. Like I said I thought it was a faulty gauge. Ran fine even when it was pegged. But when I jumped out and popped the hood it was a differant story. I had my temp gun with my and the radiator was only 100degrees at most, but was getting much hotter reading from the motor itself. Valve covers 230d, coolant lines from heater core 160-190( and the heater was blowing cold air), exhaust manifold was 400+, heads were around 250d, Those are rough figures, I dont have the paper on me that has all the temps I wrote down. along with misc. notes.

Ohh and the sludge was more of a redish color, closer to rust, not ATF red.