[THEFERMANATOR]

I'm not familiar with the VOLVO T-stat housing set-up. Maybe you could post a picture of it for us. I know on the MERCRUISER's many have some sort of check valve set-up that can cause problems. Or you could be putting the T-stat in the wrong spot. I know the T-stat in all of MERCRUISERS doesn't go in the intake itself, it goes inside of the housing and has a spacer under it. The 2 holes you are talking about were used on the 87-95 V8 truck engines for the heat riser ports for the heater core. Small blocks are known to get hot spots in the rear from no water circulating up through the rear of the intake, so GM put the steam riser set-up in to eliminate hot spots in the trucks. Gaskets are available that don't use those holes. What does the water look like in the oil? Is it a slimy film, or actaul water?