OK, so just been out and looked. The head gasket is definitely gone, there is now coolant on the dipstick

I think I've found the culprit as well, one of the core plugs is definitely shot..

 

Looks done...

 

A core plug going is not the cause of the HGF, assuming you have an HGF. Corrosion elsewhere in the cooling circuit could be causing coolant to get into the oil. On my last XJ, I found serious corrosion of the timing chest cover where the coolant passage into the block is located. By all means lift the head, (its probably a prudent move if it's never been off before), but this may not be the end of the problem. Certainly replacement of all the core plugs would be prudent as well. A lot of owners never put anti-freeze in the coolant if they lived in warm climates, but the addition of corrosion inhibitors in the anti-freeze prevents a lot of corrosion. Your core plug looks as if this aspect has been neglected in the past.

 

Fraser hit the nail on the head.
When the head is removed have it checked for warpage and have the machine shop pressure test it too.
Consider having a valve job done while it's off.

Corrosion and over heating go hand in hand.
Over heating also causes head gasket failure.
The dissimilar metals expand beyond their normal rates and crush the head gasket.
When things cool down, you have a leak.

Don't drive the car in this state once coolant has contaminated the oil.
The coolant turns to steam and washes the oil off the crank and rod journals and off course, you get bearing failure and crank damage.

 

I suspect it overheated when the coolant got out, seems my temperature gauge is not to be trusted

 

I have sent you a PM, now just looked at this, looks like it may be time for a engine overhaul, there looks like no evidence of much anti freeze looking at the gunk coming out of the core plug, I would look at taking the head off, you will soon see what state the waterways are in, they corrode badly where they enter the head and often eat away at the head where the head gasket is, this can be TIG welded back up and the head skimmed.

If the waterways are badly gunged up, you really need to acid/caustic dip the block to get it thoroughly cleaned, for more info on costs etc. see my PM.

As Jeff says, don't drive the car, when the oil and water emulsify, you lose most of it's lubricating properties as well as being corrosive !!!

 

Definitely time to pull the engine, I started off just doing the head on my 3.4
When I put it back on I suspected that I might have bent an exhaust valve (or 4 I didn’t notice the cam wasn’t moving )
Decided to pull the engine as a leak down produced air from the sump.
All six top rings broken and the oil pump rotor has the obligatory crack in the rotor.
Ahh well time to spend more money.

 

Aye well, it's going to hurt, I'm not exactly flush at the moment after buying the old girl. I guess I'll start by getting the head off and see how it goes from there. I know I can't drive her like this without causing damage, I'm just hoping it didn't do too much harm when it went as it was night time and I didn't realise at first it had gone wrong..

 

Best if you can to do the whole engine if the rest of the car warrants it. For a Mark 2 no argument, but S-types don't hold their value so well. Make sure you inspect that timing cover as I suggested. I was quite shocked when I say mine at how close it was to a full leak of coolant into the timing chest.

 

I'll have to play it by ear and do what I can afford for now, in terms of value I know I'll never get back what I put into the car but I've always wanted the S-Type and I plan to keep it. My daughter will be the only person to get anything out of it after she inherits it...

I'll definitely have the timing cover off as the chains need replacing so I'll inspect that then.

 

Here is my over flow/recovery tank