Nice work Peter, your methodical approach works well for fault diagnosis. I would have never guessed a head gasket but admittedly i've come across the same problem on a Chonda powered VE40 victa. [Linked Image]
As you can see this one had blown out on the top and didn't have the fire ring around it.

Last edited by bigted; 23/10/15 09:17 AM. Reason: extra info added