I couldn't noticeably see any water on the sparkplug, but definitely some oil. I am going to do a wet compression test on the motor (all cylinders) and see if I am looking at top end issues or bottom end. I will report back here; if it looks like top end I will pull both heads and inspect block/pistons for damage, as well as headgasket (specifically for failure around a water jacket as this would confirm the coolant overflow issue). If all looks good with the bottom end I will take the heads in to be rebuilt and pressure tested, purchase a gasket kit and reassemble.
Any other suggestions/comments on my approach here?
Also, with regards to removing heads, can someone confirm basic procedure:
1. Drain engine of coolant and oil
2. Remove intake manifold
3. Remove exhaust manifolds
4. Remove valve covers
5. Loosen off rocker arms (can I leave assembled? Just loosened?)
6. Remove head bolts
7. Remove head
***Nothing needs to be done timing wise with the heads prior to pulling them, correct?***