I'd bet the farm those heads are cracked. They always crack between the intake and exhaust seats. Whether or not that's enough to put that much water in or not, I can't say but I suppose it's possible.
Don't know how much money your buddy is willing to pay, but the shop I work at deals with small mopars quite often and we're very good at them. Shop's number is in my signature if he's interested. Call and talk to Tom. We're not the cheapest though, just to warn you, but the engine will be good as long as it's not screwed up on installation. Dyno tested and all that...