O.k. I have oil in my water. We took off the intake manifold and found that the end gasket, closest to the thermostat housing, looked bad, but would that be the only way that oil could get into the water? Next I am pulling the heads to check the head gaskets. The engine only has 46,000 mls on it. It is an 86 GT, rebuilt 4-speed, new brakes all around and brand new tires. Custom leather seats, the only thing it needs is a paint job, and the oil-water thing fixed. Oh, I only paid $500 for it!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Please help me fix this problem. Thanks

oil can get into water (or viseversa) from any number of places. They will mix in a running engine and look like chocolate milk. after setting the oil will float to the top of the water. It destroys bearings and other moving parts pretty quick. Usually its a blown head gasket.

If you're planning on pulling the motor anyway, why don't you check the tranny while you're there? Seems odd that a tranny would need a rebuild after only 47k miles.

I doubt it's the intake since a leak there would be between a higher pressure water jacket and the low/no pressure oil in the lifter valley which SHOULD get water in the oil. It definitely COULD be a head gasket but it's kind of unusual for it to blow around a high pressure oil passage.

What do you think the chances are that some idiot poured a quart of 10W30 in the thermostat housing?

that's always a possibility