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My 960 with 122K miles was loosing about 1 pt. a week last fall and I couldn't find where it was going. I had the dealer do a pressure test and it did turn out to be a head gasket. A small external leak was at the rear just under the exhaust manifold. I replaced the gasket myself and it was a long project. Luckily, the head was OK. It turned out a little of the coolant was also getting into the oil and making it "cruddy". Up side was this gave me the oportunity to put the 204 HP cams in the engine! Works great!
I was getting a little "foam" on the dip stick and at the flame trap. I'm glad I didn't ignore it as it would have definitley messed the engine up with the coolant in the oil.
Have the coolant tested for exhaust gases and check your oil. If the leak path is between the combustion chamber and the coolant it will leak exhaust into the coolant while the engine is running. (Conversly, when off, the coolant will leak into the cylinder.
The head shop that tested my head for valve sealing and coolant passage cracking said he does sometimes see cracked heads from this engine. (Cracks between coolant and intake or exhaust passages.)
Get it tested and good luck.
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'96 965, 16' wheels, rear 18mm bar & Koni + 204HP cams at 123K. Had '85 745 Turbo Diesel for 200K.
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