Head Gasket replacement D318 8T 12 grader

I had posted in December about a coolant leak on my grader. Got back to it this weekend. This is what I did. Removed and resealed all pre-cup chambers. Number 5 seamed to require less torque to remove than others. Checked for leaking freeze plugs, seems ok. I filled it up with coolant and starting cranking the engine. The coolant was pouring out the fill neck when cranking. So I starting removing the injectors. The coolant kept poaring out the filler neck until I got to the last one, cyl #1. I put injectors 2-6 back in and cranked, no leaking. Put #1 injector back in cranked and the coolant started pouring out again. I put cyl #1 on top dead and pumped compressed air in, it would not hold any pressure. With all of this, I decided to pull the head. I found coolant of top to the piston and some pitting on the head and valves, like it had been doing this for a while.

I guess all that leads me to my question.
What are the do's and don't when installing the new head gasket?
Do I use aftermarket or buy Cat?
Should any type of sealer be used on the gasket?
I plan on checking the head for cracks and flatness.
Do I need to replace the water directors?
What else do I need to do, check liner protrusion?
Anything else?
I have all the service books but I don't think they go into great detail.

Thanks,
Muzz

Here are some pics of cly. #1 and head.

I'm not convinced that the head gasket is your problem. What does it look like. Sounds like there should be obvious damage to the gasket "fire ring". The reason I am dubious about the gasket is that CAT used the ferrules and rubber grommits on all the water passages through the deck of those engines. This should make it a lot easier for compression pressure to find it's way out to the outside instead of going into the cooling system. Most other designs use only the gasket, so if compression eats through the "fire ring" area of the gasket, then it is still contained by the gasket and finds the nearest low pressure outlet which is usually a coolant passage.

When you have the head checked, If there is some way to pressure check it, say by bolting a plate over the #1 valve/PC chamber area with a suitable gasket, and it passed that test with no leakage, I would feel a lot better about putting it back on with a new head gasket and grommits.

SJ, an old time CAT mechanic, who was on here for many years, always recommended brushing a sealant on the gasket of those long heads to avoid seepage along the gasket later. Avoid the fire ring area if you do this. Seems to me this will make it more likely to eventually get compression into the cooling system if the gasket ever fails, but it was done to prevent the all too common and ugly seepage down the side of the engine.

I have never seen the water directors be damaged in any way in the heads I have removed, but if they were eaten up by scale removing treatment or just corrosion, then they need replacing, taking careful note of which way the outlet points.

This page on liner protrusion is from a later series engine, but I think it is applicable to yours and I have never seen anything referring to the D318 as far as liner protrusion goes. I didn't have the nifty gauge when I did our D7 a while back, so I used a straightedge and feeler gauges to measure and large flat washers and pieces of pipe cut to take up the space on the studs and hold the liners down. Your liner should not be so apt to move around since it's been in the block for a long time already, but new ones do move down quite a bit when you tighten the hold down clamps.