I will usually perform a basic compression test (five cranks with the throttle wide open, spark plugs removed, fuel & ignition disabled). If the numbers are below book spec, I'll assume that the head gasket is failing.

FYI, a friend of mine's '87 740 recently blew it's heater core, a coolant hose, and started leaking from the radiator seams. Based on my best assessment, the failure was from a NEW cooling system pressure cap that I purchased from FCP Groton for $4, combined with a slowly developing head gasket leak. I installed a black cap (which is about 11 to 13 psi versus the 20+ psi factory Grey cap) in hopes of reducing the stress on the cooling system components, and it ended up doing much more damage than I could have expected. Needless to say, I do a quick test on the caps now before putting them into use.

God bless,
Fitz Fitzgerald.
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'87 Blue 240 Wagon, 273k miles.
'88 Black 780, PRV-6, 149k miles.