Something kind alike that happened to me last spring. Filled up the car with water, because I was taken it to an indoor show, then straight to the shop. Well, somebody at my shop pushed it outside overnight and the water froze and cracked the damn near NEW block in four places. I feel your pain, I've been watching the build and loving that truck, hope everything works out.
That looks like a used engine to me. Something out of the wrecking yard. Your raffle guys just slapped on an intake and carb. Look at the inside of the water pump outlet in this picture, I bet there is a lot of crud floating around inside the coolant passages... Also look at the deck surface, it's DARK brown rust. That's got to be a junkyard engine. I bet it was broke before you bought the raffle ticket! When you say the block is 'jacked', exactly what did the machine shop say was the problem with it?
I thought you were just bringing the heads to the machine shop? Did you take the block too...or is the shop saying it MUST be the block because the heads are fine??? From what I've seen of those engines...if the heads are good than the block didn't get very hot...because those heads would warp if you dripped hot candle wax on 'em... I'm thinking LOUDPEDAL is right on the money!
I've had an intake gasket not seal correctly and got the milkshake in my pan, but no oil in the cooling system. Think about it, the water would be escaping from a coolant passage between the intake and head, although possible it would be unlikely to have oil go up (against gravity) and go into a hole that water is rushing out of. When it happened to me I had a gallon of anti-freeze in my pan that came out before the oil once I removed the drain plug . The radiator was clean, although a gallon low...
Well in an LT1 there never was coolant passages that went to the intake, unless the slapped on some earlier heads on there. But who knows.
Well in pictures there are small holes in the place where the water passages would be on an older SBC, so I am not sure what those are.
Make sure you didn't block off the heater hoses! On LT-1 engines they use the heater hoses as the crossover flow between heads. Thats why the intake has no coolant going through. If you block off the heater passages you get no flow between the heads and all kinds of nasty air pockets and hot spots. This COULD be what happened. Just my thoughts I've seen this happen before.
Running an engine with guages temporarily out is like running an engine with oil temporarily out , its never in the interest of promoting engine longevity by any means. Cant hear the electric fan?, put an indicator light where you can see it to show you when its running. Open headers sure sound impressive but if you want to know everything about whats going on with your engine ON A TEST DRIVE,,Id recommend mufflers. Now if you run a leakdown test on every cylinder of your engine ( after reassembly of course) you should be able to hear( even if you need to use a stethoscope) air escaping into the exhaust or the intake manifold,,IF!!there is a leak. If that checks out , pressurize the radiator , which will in turn pressurize the coolant passages and where they go from the heads to the block,, if it holds pressure, great!, if not you need to find out where the leak is . You can run a dye check with a black light for exterior leaks and ,check again for water in the pan, or valley.BTW, did you find the water in the block and or cylinders BEFORE you lifted the head(s) or AFTER?? If after it may have just been spilled coolant from the block and heads. Questioning if the reverse pump scenario is or isnt circulating the water in the rad ? Heres what to do , leave the cap loose and start er up,,let it warm up til the thermostat opens, carefully remove the cap and watch the water to see if its moving ,,, cant tell? spit in it , greatest rad flow indicator test there is. And a steel machinists straight edge and a set of feeler guages will tell you if your head is warped , any automotive machine shop that mills heads professionally should know about milling the intake port side of the head to correspond with machine work on the combustion chamber side of the head.
Just a note - make sure you get the same generation block if you are going to replace the block. I don't know the cutoff years, or what is interchangeable and what isn't, but I do know I have heard the LT1 guys talking about the short block being different between the early and late cars, and not everything interchanges. Just thought I'd throw that in, in case you go that route.