Well we finally got the 4Runner back on the road. It ended up being a blown head gasket, which was our first assumption even though we were hoping it was something else. Once we had the head off, it became apparent to us that the blown head gasket wasn't our only problem as half of the timing chain guide was missing.
Here's a shot of the engine pre-disassembly. It's pretty dirty...
This is what we found when we finally got the head off, and some close ups too. If you notice the piston furthest back (Number 4) you can see the edges looking rather clean. This is evidence that coolant was leaking into this cylinder and basically steam cleaning it. Next is a close up of the timing chain guide. You can even see where the chain started wearing into the timing cover. Seems the blown head gasket was a blessing in disguise because had that chain snapped we would have definitely had far more work on our hands!
Here's a shot of me all bundled up installing new piston rings. You can see my awesome diesel engine on the right side of the photo... and yes, our garage is a mess! One day will have a nicer shop, good things come to those who wait.
And now here's the finished new engine! It looks a lot cleaner, too bad we were in such a hurry (and the cold weather) it would have been nice to paint at least the valve cover. I also kind of got too wrapped up in helping to build it that I forgot the snap more photo of the progress. I'm sure this won't be my last engine rebuild tho.