KA isnt worth $700 for someone to lookat it. you could get a used one in good condition for half that, but possibly you dont have the time for that.
that motor prolly had overheating issues before, so your friend maybe didnt put a thermostat and coolent in it thinkign the pure water would keep it cool???? All the coolent does is act as a antifreeze and keep the block from rusting, nothing else really. Overheating could lead to headgasket so that coulda been the problem.
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