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replace head gasket? 700

I'm going through a 1994 L block 230FT I got from a yard. There was dirty water in the turbo from the California rain and I saw a leaking exhaust gasket when I took off the manifold. Rust discoloring runs down the block under the #1 cylinder from the water pump back along the head seam about 5 inches. I wonder if this was a small leak at the upper O ring of the water pump? Or the head gasket is leaky? It concerns me. Should I pull the head and replace the head gasket just to be safe? The engine is out of the car. The junkyard guy says the engine has only 65K but it seems like it has more or it wasn't maintained too well or just sat around awhile. I am curious about the condition of the motor overall. The valves wheeze when I turn the crank, but compression seems good and even with good pop when I manually crank. Would you open the head and oil pan and inspect the engine? I want to take care with this engine and get it ready to plant in my 1985 760T. I'm changing the water pump and timing belt and some gaskets. Just want to be safe and sure and take the necessary precautions. Thanks for your consideration.






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