White milky substance/ Oily coming from hole...

Most likely not. Do a compression test, that will tell you way more about the state of the head gasket and engine than a rusty cam. Adjust the valves first. I hope you've changed the oil.

See my above post.

If you want to use water, use it only temporarily and ONLY distilled water (i.e. not from the hose in your yard). Antifreeze has anti-corrosive properties and also helps lubricate the water pump.

Measure it. Why is this info needed?

Come to JCCS in September, I'll be there.

thanks for the answers, I will be trying them all this weekend. :-)