I'm suspecting a crack in the water jacket on the intake manifold...
Anyone else had this issue? Can't find anything obvious.

 

Its plausible.

However, how does the heater valve work in an E-type ? On Jaguar saloons of old age, it has been known for the diaphragm in a vacuum operated heater valve to perish and allow coolant to pass into the vacuum line, thence ending up in the inlet manifold, as that is where the vacuum line is connected.