Sounds like internal leakage, remove the precombustion chambers and check them, if ok then remove the heads and check them.

do a coolant test for combustion by products.

i use a product called AOC 1000 eco cool concentrate from australian organic coolants its not that expensive and i use it in everything lasts six years

you mix it at 7.5 percent so very economical it work out 14ml to the litre of system volume i simply mix it with rain water. dont buy premix thats a mugs game concentrate always works out cheaper.

note this is a anti boil and corrosion inhibitor only. not anti freeze. for freeze protection use AOC5000 eco freeze.

if your worried replacing the coolant just save it in a bucket.
i would do a cooling system flush you can make a home made one using laundry powder such as omo which is one of the strongest and contains caustic you simply add about 3 or 4 scoops of omo to a jug of warm water stir till dissolved and pour into the rad run for 15 to 20 min and drain refill with fresh water run it again and drain it.

Thanks for everyones advice,i'll see how much water or coolant comes out by loosening the sump plug as you suggested gemdozer and go from there.
I won't run the motor again till i can sought the problem out.Theres definitely too much moisture on the dipstick to be normal.
I will look at buying the coolant concentrate you suggested trainzkid88,i bought 25 litres of sca coolant from supercheap auto costing 100 dollars so definitely way too expensive.
So i have a little bit of mechanical knowledge, but the thought of removing the heads seems a little bit daunting.You were saying to remove the precombustion chambers RomeK/G, is it a big job to check them and how can i tell if they are faulty.
I'm thinking i might have to build a cover like a large high carport over the dozer to protect the motor from the weather while i'm taking the heads off.Where the dozer is located is too far from town to have it transported to get a mechanic to fix it so i would be looking at doing it myself mainly for the cost alone. I do have a shop manual but i have'nt found too many videos on the best way to replace the head gasket on dozer. Any help along the way will be appreciated,cheers.

Removing the chambers is not that difficult, need the splined tool to remove them, of coarse drain the coolant first. See if they are pitted and check the sealing washer on the end. Service manual will show removal and installation, if you dont have one someone on the site I'm sure can show the page.

I run rain water in my old Cats, bore water is a definite no no, years ago, a lot of guys used soluble oil mixed in with their water to keep the system a bit cleaner, don't hear so much about that now.

If you tell us your location, there might be a member in your area who can offer some guidance, I've taken pre-combustion chambers out of a D2 and two D4 Cats, they are in the heads tight, I needed a cheater bar 4 feet long (1.2 metres) long on my 3/4" socket to get them undone, you will need a couple of extra Weetbix for breakfast when you do yours....

one problem with soluble oil.
you cant get plain soluble oil easily any more. most of what is available now has additives to stop bacteria and improve performance etc witch are no good for what we want it for as it is made for cooling and lube of cutting tools. and since it works better than the plain product its not used so its not stocked in store.

for most of these old girls all we really need is corrosion inhibitors. yes people in cold climates need freeze protection.

Thanks for everyones replies, its looking like i'll be removing the pre combustion chambers to check them out first.I will see if i can get the splined tool to remove them as you mentioned Rome K/G from the local Cat dealer.So far i have had pretty good luck removing bolts etc without breaking them or too tight so hoping the same with removing the chambers won't be too much of an issue and do have a large breaker bar as you said i might need Mike Meyers.
I'm hoping for a bit better weather before i attempt the job,and spring is around the corner in Australia so will be a good time to make a start on it.
I do have a workshop and parts manual ,so it should help me alot.
I'll keep everyone posted on how i'm going with it.,Cheers.

Unless you are married to Gina Rhinehart, you might want to try getting that precom tool from Tillys up in Toowoomba, it will be available as a aftermarket part, some one here will chime in the the tool part number.

Cats parts might be very good quality most times, their prices for items unique to their machines can be eye watering, like that tool aftermarket might be $50, from Cat I wouldn't be surprised if it is $427.83! We will find out before the day is long, have a look in your workshop machine it should give you the part number of the tool.

Buy a big box of Weetbix too, in readiness for removing the precoms, you will also need a big torque wrench for over 200 foot pounds, your workshop book will tell you, the little D2 precoms are 180 foot pounds from memory. Borrow the torque wrench, unless Gina is paying....... LOL

The tool or socket is 5F8353. Avail. on Ebay also

$US11.50 plus postage off fleabay USA, at that price I'd buy 2 just in case I broke one half way through the job, I can't get that p/n to work here on the Australian Cat Dealers parts site

Tillys list them as available, but don't give a price, you have to phone them, and from my experience with Tillys in the past, the bill usually arrives about 2 weeks before your parts, and their shipping cost starts at $30. They are the only company I've dealt with who really don't care if you buy from them, I've waited 7-10 days for them to answer a email asking about parts.