What are my options. We fired up a 40 over 440 on a run stand yesterday and noticed the cooling system pressurized somewhat. I capped it and was able to run it for a very short time about a 2 minutes and shut it down. I pulled the dip stick and found water starting to mix with the oil. This morning I pulled the heads and found where the cometic gasket flares out on the lower sides water was getting passed the sleave and I'm sure it puts pressure to the cooling system on the compression stroke. It is a 40 over gasket and actually sealed right on top of the sleave except where they flair out. Is there such a thing as a round head gasket? Any other ideas? New block?

Maybe pull the sleeve and reinstall it with anaerobic sealant on it? Loctite 518 is what we use at work.

Make sure there's not a small crack in the deck of the block.

Different brands of gaskets have different sizes and shapes of openings.

What bore size is your gaskets for ?
Is this a stock cast iron block with a flush sleeve?
I had one 413 H.D. Industrial block that had been frozen bad enough to crack # 3 cylinder and on the outside of the block beside #3, it wouldn't hold pressure with a sleeve at the top of the sleeve between the block and sleeve beside the lower front outside head bolt for that cylinder
I had to scrap that motor

40 over with a 40 over gasket and the sleeve is milled flush and leaked at the top to the cylinder where the gasket widens. If the gasket was round it might work, these are Cometic but the Felpro I have are the same pattern. And yes cast iron block.

I can't remember the name of the ceramic sealer I bought from Goodson years ago to seal a old Mopar top fuel cast iron block that had multiple leaks from someone grinding in the crankcase to clear the aluminum rods and stroker crank counter weights, it was a mess.
I tried first filling the block with block filler to the bottom of the freeze plugs, that didn't work
next was the Goodson sealer that I had to put into the block and use a torque plate too seal the cooling system up along with some plates to pour the filler in and use a air hose fitting to pressurize it to put 15lbs. pressure on top of the sealer for 15 minutes and then drain it out and do the other side. The final step was to have it bake at 300 or 350 degrees in a powder coat oven for 20 minutes. It never leak a drop after that
On your deal I would be tempted to try and use one small container of Aluma Seal first in the motor while running and driving it so it has pressure on the sleeve to help force that sealer into the leak
If that stops the leak make sure and change the oil and filter several times with very little run time between the 2 or 3 changes to make sure to flush the water and any other chemical put into the oil from the cooling system like antifreeze