New 1953 Cat D4 owner

ME and a budy of mine bought a 1953 D4 6u back in april with the pony motor not working but a short pull of less than 5ft it started right up. we ran it a bit at the place we went to look at it and we decided we could not go wrong with buying this old Cat. Loaded it up and brought it home. we unloaded it at home and started playing with it in the parking lot pushing on some old dirt piles noticed that after a hard push the clutch seemed to not be working correctly so we pulled it in the shop right away. we removed the pony motor to find it was no good with the cam wiped out the mag gear was broke and the cylinders were filled with water and rust. so we converted it to 24volt electric start that works great. We adjusted the clutch and that took care of any slipping problems, we did a complete service on it. Even took the fuel tank off and cleaned it to find lots of sludge and rust in it, we figured if the tank was that bad the main fuel line couldnt be much better so we took it off and blew it out to find it half plugged with rust and sludge.. after a few months we had it up and running stronger than it probley had been in for a long time.... but yet we are still a little concern of the smoking and popping that it keeps doing do we have a bad injector valves need adjusted? and we cant keep water in it. if we fill it up it just keeps pushing it back out the over flow tube we are thinking we might have a blowed head gasket or something along these lines. does anyone have any ideas to help us figure this thing out? any suggestions or ideas of what to do with this before we tear into this old beast?