302 with water leak from bell housing & milky oil

Scenario: Bought a ’79 Ski Tique with solid hull, good stringers and decent interior, only problem was the motor had frozen last winter and popped 2 of the port side freeze plugs (if not worse).   I also picked up a totaled ‘83 Nautique parts boat that same week with a “good” 351w figuring worse case I could just do a motor swap.

I reinstalled the freeze plugs, poured in some new gas, hooked up the hose and fired up the motor. The first time it started and ran with ether, the 2nd time it died after 2 min, and 3rd time it ran great for 10 min until I shut it off.   After shut-down I re-checked the oil and found it was a bit milky and there was water dripping from the bell housing. I checked around the backside of the motor (outside the bell housing) and didn’t find any leaks. The water was clearly coming from the bell housing. At this point I decided to shift gears and focus more on the 351 as it was my best shot at a working motor.

In preparation for the 351 tune-up I was thumbing through the 302-351 service manual when I came across this interesting paragraph:

“WATER IN CRANKCASE:
If the crankcase oil shows evidence of water, but no evidence of water appears in combustion chambers, inspect the flywheel housing to be sure no water has accumulated inside. If water is present inside the flywheel housing, the annular nurling of the Ford crankshaft at the rear main bearing seal can force water into the crankcase”

My questions are:
1.)     What the heck is the annular nurling of the crankshaft? (and isn’t it spelled Knurling)
2.)     Where is there water near the crankshaft?
3.)     I’ve heard there are freeze plugs in the bell housing, can anyone confirm?

In the end my plan is to swap motors no matter what, I just wanted to know what I was getting into when I got the 302 on the test stand.

Not going to lie, I completely forgot you mentioned it before. Thank you for both times. I didn't mean are there plugs actually in the housing, but in the block. In any case you've confirmed what I was thinking.

Also I forgot to mention I'm getting milky oil in the bilge so whatever is happening could be leaking in our out. The oil does seem to clear up over night which would lead me to believe there not a TON of water in the oil. Heck I could have gotten some water in the valve cover grommets when I washed it and the bell housing leak is unrelated.

Side story; I had a tractor do some funny milky oil stuff to me once. Few years back I purchased a 38 year old IH Lo-Boy, after taking delivery I changed all the fluids & did a tune-up. A week or so after I noticed the oil was milky. I didn't have time to tinker so I just changed the oil and went back to work. Week later, milk again. At this point I was getting ready to tear the motor apart when again I needed to plow the driveway so I changed the oil for a 3rd time and it's been clean ever since. My guess is it had been sitting for at least 2 years prior to my ownership it must have just taken on some water somewhere which needed a few changes to filter out.

She's is currently hanging off the gantry crane while I rehab the trailer, but once that's finished I may just pull the tranny to see whats up. May get lucky for once and it be a bad freeze plug, bum rear main and contaminated oil.

Plus I find out the "good" stringers are crap and my back-up 351 has 40 psi in one cyl, all the rest 90-110. Not a good day.

Anything is possible, from what I understand it was just a victim of poor winterization then the previous owner ran it a dozen or so times trying to figure out what was leaking before giving up. In any case it's a parts motor now.

Just need to keep my fingers crossed the oddball compression # on my back-up 351 is something easy.

from that picture there was obvioulsy a puddle of water sitting in the bellhousing area of that motor, the waterline starts up high on the righthand side, passes diagonally down and to the left covering about 2/3 of the crankshaft flange. There even looks like theres some rust flakes right at about 4 oclock on the crank seal opening on the block, so its possible that it was drawing water in thru the crank seal as any that leaked passed behind the flywell. Can't imagine a bellhousing is water proof so you would think that any water leaking out the back would drain out into the bilge. Was the engine/boat stored with the bow down, and leaning to the drivers side? Was you oil really milky with a bunch of water draining from it before the oil came out the drain tube, or was the water mostly mixed into the oil?

Not being a ford guy, are those rectangular areas the "freeze"/casting plugs, or is it part of the block casting itself? If they aren't part of the block casting can they be replaced?

Thankfully I have this motor in the garage

https://www.youtube.com/watch?v=HFzP8zFGPu8

https://www.youtube.com/watch?v=VVaaAqufd30