Make sure you use new "ROVER" head bolts, not after market.

 

Hopefully the new headgasket will do the trick. If not, yeah, it will be in the block somewhere. If that's the case, I'll share that many years ago Iboughta 1979 Mustang for $25. I thought it had a bad headgasket. I changed it and it didn't make any difference, head was straight (2.3L). Blew white smoke out the tailpipe like crazy. Since I didn't want to put any money in it,I opted for the total cheap-skate approach: I put a can of that miracle 'Head Gasket Repair' stuff in the coolant, and followed the directions to the T. It stopped the leak alright and I drove the car for thousands of trouble-free miles. Every once in a while it would smoke a little and I'd put a little bars leak in it and it would stop and be good for several months. I gave it to my brother and he put about 15k miles on it, and eventually sold it to a buddy of his for a few hundred bucks -- who drove it for quite a while. My point is, if it turns out to be more than a headgasket and a new block isn't in your immediate budget, there are some short-term approaches. Hopefully the new gasket will do the trick.

 

Thanks for all of the advice guys. I got my head gasket kit and bolts from Atlantic British. The heads look really good now that they have been reworked...the machine shop only busted me for $198.00 which I thought was a pretty good deal. I will be bolting everything back up tomorrow along with changing the transmission and transfer case fluid which will also conclude the 90K mile service I started a couple of weekends ago. My buddy got the U-joints switched out today so if by some miracle the thing quits steamingI should be in pretty good shape for awhile...knock on wood of course!