If it were me I would not remove the head until a compression test on all 4 cylinders and a cooling system pressure test is complete. Please report back with the results. I did not read that you noticed a surging in the coolant reservoir, something that would indicate a head gasket problem. Let's find out where the water in the oil came from before tearing things apart. Most importantly right now is keep the engine moving with some oil in the cylinders.
If your distributor suffered a good dousing, everything within is suspect including the electronic ignition, distributor cap, rotor and plug wires.
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Neil
1977 Catalina 30
San Pedro, California
prior boats 1987 Westsail 32, 1970 Catalina 22
Had my hands in a few others
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