What I'm seeing in the picture is an engine block that is badly
in need of cleaning. If that was indeed dipped in a hot caustic
tank then it was only in long enough to clean the grease of the
outside. Who "rebuilt" your engine???
And what I'm seeing in the picture is very heavy rust scale that
may have been loosened in some way and is now breaking loose
and clogging the water passages. Also as indicated by the color
of the water droplets on the deck you have a heavy rust problem
in that engine.
Denny Graham
Sandwich, IL