Yes, liner seals dry out.
I had a thread about our D6 several years ago. I actually washed the sediment away from the base of the liners by flushing in through the block drain fitting while I was rodding the radiator flues out. As soon as I filled it with water after reassembly it filled the pan with water.
Link
http://www.acmoc.org/bb/showthread.php?17111-D6-9U-running-HOT-and-radiator-cleaning&highlight=dike
One other thought...a year later I had moisture getting in the oil again and assumed it was going to have to be overhauled until I took the valve covers off to retorque the head just to see if that might stop it. Sure enough, as expected there was water and oil pudding in there and I would have thought nothing of it, just what I expected to see, but I decided to warm it up to readjust the valves while I was under there. As soon as I started up the pony i had a squirt of coolant from a rusted out soft/freeze plug in the center of top of the head! There are 7 small plugs most are inside the valve cover boxes though I think 3 are outside. I replaced them all and stopped the leaks again with the exception of a seep along the head gasket on the right side of the engine.
IF I read correctly, you replaced the "pony" engine with a newer one?
In early 70' I worked for Caterpillar Dealer, they overhauled an engine in 619 scraper, put all back together, filled the radiator until water came out of the Oil Fill! They had hooked a line from the water jacket to the intake side of the head! Yes, this was in the field where it was being used! No one bothered to read the updates Cat put out and the head was different.
Moral of my story -- I would look to see what changed when you changed the starting engine before I jumped to removing the head and liners.
cts
Read ,cc jerseys post. I also flushed the block with a garden hose till all was clean while first working on the cat. I think tomorrow I will fill engine with fresh water with pan plug still removed to see how bad the leak is. It did not have water in oil when it returned from SM. Can't remember how long it sat before I removed the water to work on the pony. Today I was thinking I had a huge leak, but could be a dribble that went into the pan over time. Will try stop leak if I can.
Had a 4-53 Detroit in a paving machine that had a similar leak. Only used the machine 2 to 3 times a year. Welded a petcock on the tin pan. Used propylene glycol for coolant. Just drained of coolant when we needed to use it. In the military, propylene glycol can be used for engine oil in emergencies.
That fix may be in my future. I do not want to pull that head. I will look under the valve covers. On first inspection when I first acquired this 12 there was some gunky crap that looked like water or moisture under the rear valve cover.
Bars leaks should be fine as long as its not getting into the oil much. If it was still leaking I would rather have DIKE.
If your still around I'd like your email addr.
Daron
Opened side cover off pan and cleaned it as good as I can. Did some more pressure ck. No water visible in pan. Dumped in 6 gallons of oil and tried to fire it. Crap , no fuel pressure. Clogged fuel line. I cleaned the entire fuel system while resurecting including the tank. Blew the line backwards and it fired quickly. Now good fuel pressure. Will have to watch that fuel screen. Ready for Arlie play day. I hope!!! The no fuel was the FIRST problem in this saga that had me cranking forever with the pony.
Hope you guys are not getting tired of this subject. I have been working on equipment since I was 13. Now 75. One time a supervisor for a fleet and 22 man shop. I. have never been ashamed to admit my mistakes. That is how you learn. My biggest mistake on this job was not checking the oil on that pony. No one to chew my but except myself. Second mistake was when filling the main engine with water, got curious as to where it was going. INTO the PAN???? Now I do not know. Pulled the dip stick. (engine off) What did I find? Oil over the full mark. Normal for a cat with engine off. ( I did not remember this fact) Immediately started to look for a problem, concluded, water in the oil. What the hell, big problem. You read my posts. While dumping the oil which has been sitting a while, there is very little water in it. The oil looked like crap, BUT, I had just put detergent Delo 15/40 in a engine which had been setting for 20 years. Then worked it hard for 3 days at SM. Pulled the pan side cover near last of this saga and still had 1/4 inch of sludge in it. Question??? Was that gray looking oil I found just 15/40 with 70 years of sludge mixed in.