There are several possibilities for the water leak, none of them good, but some are easier to fix than others. A leaky head gasket can, and does result in coolant in the oil, if it gets past piston rings after puddling on top of the piston. Other, more serious problems might include cracks in the head or engine block. Some of these can be repaired. other, more sdrious ones will require replacing the damaged part. 235 engines aren't particularly scarce, but they can be pricey at times unless you get lucky.
Is the truck still running regularly, or are you planning on a long-term restoration project? I'd begin with a pressure test on the cooling system, with the spark plugs removed. After a few hours with a little pressure on the coolant, spin the starter, and see if coolant squirts out of any of the plug holes. That will isolate which cylinder(s), if any, are responsible for the leak. If water gets directly into the crankcase without entering the cylinders, the crack is probably somewhere in the water jacket at the bottom of the cylinder castings. That's a pretty serious problem, which might not be fixable without another block. Good luck, and keep us posted on your progress.
Jerry
