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I'm not as familiar with the 2-53, but have rebuilt many 3 and 4-53's.
Quite possible the block is cracked somewhere in the airbox. That's probably the worst case. Let's hope it's not that.
You used a new top end head gasket kit right? Kind of a misnomer, since the gasket is that squared oring that runs around the groove in the deck. There are also several square cut o-rings sealing the water and oil passages. Maybe one of those is not sealing, or you missed one.
The heads usually crack in between the valves, and so would only let water into the piston where the crack was. Sound like this is not your problem.
Those liner o-rings are usually pretty easy to install. Biggest thing is not to roll them, and lube them on install. I use coolant, noting excessive, just a smear with my hand right before i push it into the block. I've never had a problem. Could it be you have the wrong o rings?
How about the fire ring at the very top of each cylinder? If you forgot, or didn't have them, your liner will rise a little when turning over, and maybe that's got the liner seals out of place. Though i'd think the liner would be lifting up and down with each revolution, so you'd notice other problems.
Hmm, will go have a look at a 3-53 i have torn down tomorrow and see if i can think of anything else.
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