The head bolts are not supposed to go into water. But as was stated in the post above, either because of a faulty casting or an incorrect machining step, it is possible.

There is no way that the exhaust manifold bolts could get water inside the valve cover. That one is a dead end. Really, people!

Timing, you are close enough. There is no need to change what you set. Period. How could that have anything to do with the problem?

Thermostat? If it's stuck closed the engine will overheat in a few minutes.

The kit for combustion gases in the coolant is around $30 if you shop. Lisle 75500 I'd rather buy a reusable tool than another pair of head gaskets. I still don't see how a crack to combustion would result in water under the valve covers.

So we're down to leak from the intake or past the head bolts. Check those right after the combustion gases test.

R.