Major Issue with New 306

I dropped a fresh 306 into my 89 GT a couple weeks ago. Got it started with no problems. Ran great for a few moments, then the thermostat opened, and MAN! Water mixed with oil and condensation smoke started pouring out the back. I am talking a lot of water/oil! Car naturally started missing badly.
Here is the kicker: there is no water at all showing on the dipstick. So, I am sorta thinking that I have an intake manifold issue.
I installed a Cobra upper and lower on the motor. It showed no signs of porting. Interesting fact is that where the water pipe screws into the intake, at the passenger side front of the intake, it shows to have a small leak, but, nothing major.
Has anyone run into this? This is just killing me!
Any help from you professionals would be greatly appreciated.

Motor is fresh and good. My machinist did the build and put the lower intake on. I don't think he ever uses the cork front and rear anymore. Major pain.
If it were a headgasket, wouldn't there be water in the oil, most likely?
Can you give me more info on trimming the intake at the water passages? Not sure I am up to speed on this, and the machinist may not be as he does mostly Chebbies.
No idea if he put sealant around the water passages.
No idea what gaskets he used for the lower intake, but, he normally uses Felpro for my stuff.
Thanks for the input! I am due to go talk with him this morning and I will ask him some of these questions. He is a very sharp guy, and has done other 5.0s for me, with no issues, so I sure don't know what is going on.

Found it!! Man, what a relief! I took the car to my machinist yesterday, and he had brought in a 5.0 guy-- super sharp. Anywhoo, we were standing around the car discussing it, when, even before the 5.0 guy suggested anything, it suddenly hit me about the large hose on the back, passenger side, top of the intake. I said, "Hey, wait a minute! Is this vacuum, or water?" I had plumbed it to the driver's side back of the upper intake. He disconnected it, and water poured out!!
We cleared the cylinders, cleaned the spark plugs, and fired it up. No miss, no oil out the back, no water! And after a couple of anxious moments, the condensation smoke cleared out. Car is now running great!
As I had noted, this is my first rodeo with the 5.0 motor install, so I am gonna have to be really in the learning mode now, cause I have an another 89 GT that I will be doing a motor on in the (hopefully) near future. This vacuum / water line stuff is just really confusing!
Thanks for all the input guys!

jsw81 said:

I learned the hard way on this after my cobra intake install, and it may be your issue. Off the hard heater pipe there is a nipple that runs a hose to the factory egr block. The cobra does not use egr cooling for the built in egr. I did not realize that and connected the hose from the heater pipe to the vacuum barb coming from the front of the intake where the factory egr block would sit. So I was sucking in coolant through the intake and was getting a ton of water flowing out the exhaust. That vacuum barb is actually for the charcoal canister.

Not sure if that's your issue, but worth a shot to check!

Click to expand...

I thought this was my issue at first, but, I quickly discovered it, and corrected that error right off the bat. See my comments below on what it turned out to be.