well I figuired out the problem, turns out it was the head gasket leaking, since I tightend the head bolts last weekend I first did a pressure test on the coolant system, 16 lbs solid for 15 minutes, did a compression test on the combustion chamber found out the intake was leaking, took it off installed a torque spacer w new gaskets.
the water in the trans oil was due to a last minute washing before I bought it, the transmission vent tube is broken off at the plastic elbow coming out of the case allowing water to go into the trans. drained the oil, replaced the vent tube, filled it up with some cheapo 10/40, had a little cloud in the glass ran it for about 30 minutes,the cloud lightened up to half glass on top, drained it, filled it back up with some lucas 10/40 no more milk in the glass, ran it for 15 minutes still no milk.
I also realized that most of what blew out of thwe tailpipe was gas, left the petcock on last time we loaded it in the trailer, so I pulled off the carb; fuel valve was gummed open. cleaned her up and hopefully i'll be able to save the pump seals for the next rebuild.