I agree with what the others have said, especially regarding getting to the bottom of the fuel leak and the water in the oil before attempting to rely on that engine.
That engine does indeed look like something from an archeological dig. You mention it's raw water cooled, so you can bet the inside surfaces are pretty caked up as well, especially the water passages. You may want to consider a muriatic acid soak and flush to clear out some of the scale (Moyer provides simple instructions for that). Of course, that interior scale may be the only thing blocking even more leakage! But if that's the case, it would be good to know now.
What part of the country are you in?
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