Great..... lets hope the Doctor has misdiagnosed!.................
Actually.... I think I did. (you may be in luck with the corrosion/damaged)
OK... so... I'm not feeling very good today, and finding motivation at the shop is a hard thing. So.... I pulled up some old pictures, along with the flow diagram.
While my labels above are correct.... I think I looked at the flow chart wrong. Actually... it's poorly drawn in the manual.
If you look at it.... the flow arrows make it look as is the cooling water is coming in though the exhaust ports. It's a reasonable assumption since we run wet exhausts. But now... I think the exhust water doesn't com in, until after the expansion chamber.
BUT... after looking at physical pictures... and looking more closely at the flow diagram.... I think the water is actually going outside the exhaust at that stage. and the part I listed as "Should be dry", is actually the outer water jacket for the exhaust ports in the lower plate.
So... my conclusion is.... YES... there is cooling water there. (so it could leak)
BUT.... there should be very little water pressure in the block. (17 psi at full throttle) So... that gasket shouldn't have failed. I guess there could still be a small amount of corrosion, keeping it from sealing, or the nuts holding the engine were loose.