I recently acquired a 2003 Suburban with 229k miles from auction. It was low on coolant when I bought it, and is consuming coolant with no visible puddles or clouds of steam from the tailpipe. It has 706 heads and through the oil fill hole, all surfaces appear dark brown with the exception of the head bolt, which appears clean-looking and golden colored. Hopefully the pic will work—it’s out of focus but I think conveys what needs to be seen. What say ye—time for a head job?
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My experience with the Castech failure is that the coolant was leaking so slowly and burning off quickly enough to not cause a milkshake in the oil. But the remaining chemicals/residues remained in the oil and, over time, sludged up the whole motor.
I don't see sludge buildup in your pic. It looks like normal oil staining for 200K+ miles. If you don't see any traces of an external coolant leak (white chalky trails) or smell coolant burning off, then it may very well be leaking and burning internally. If it were me, I'd closely inspect every external coolant route with a good light. Don't forget to check the bottom of the radiator and on the splash guards, all hose connections, remove the intake duct and check the coolant crossover connections under the throttle body inlet, the steam tube fittings, etc. If no evidence of leaks are found, send a sample of oil to Blackstone Labs for analysis then proceed from there.