Rover owners: Possible hgf problem and loads of pics

Hi guys ive been an mg and rowber for several years. Currently have an mg zt diesel modded but thought i would get myself a wee petrol rocket for sunday fun. So bought myself a lovely mg zr 160 vvc trophy in silver.
Looks great had no heater but i was tols saab control valve but here is where the fun starts.

On way home the problems started i see the car running rich and stuttering so i start my investigation. It needed new plugs ht leads and she started to run great but as soon as car is stsrted 2p secs later she would stutter and loose power for next 2 mins or so unless you sunk the boot to the floor. Looked in loads of forums suggesting loads but best line is seen was an mg tf with similar issue where he had frayed wires to his lambda. So off i went pkugged in the ovd reader and sure enough p0130 and p0135 codes for o2 sensor 1. Off to scrappy and got lamda and stuck it in now car runs perfect. Great i thought ill take it to work tomorrow. On way there as car was driving great 50 motorway miles later i reached traffic lights and white smoke started coming from the rear water light came on stuttered real bad. O **** i thought. Went to work came back filled water which was down a good bit and drove home fine only for it to happen as i enter my drive. So i look under oil cap and got greated with this lovely mayo colour. O dear i thought hgf.

So i got loads of forums together read loads of articles went and bought a haynes manual for general info and insight as they give useful guides and making tools and pics instead of buying them and i got a RAVE manual set on cd for everything else.
I have never done a head before but i am a computer engineer so can read a manual . So now i start into the car and started taking stuff apart following a combination of forums and manuals.
I see new timing belts and water pump but very soon i see bad items.
First up is the thermostat for frig sake can people not just replace a 5 pound part when it fails.
Next I changed over the saab control valve hoses to the older type to avoid that problem again. Now i remove the inlet manifold and i am so glad i did now i see what i think is the problem or definitely part of it. There is mayo in the breather pipes showing an oil water emulsion. And i go on to take off and look at the inlet manifold and gasket and its awful. Someone thought i was better to use what appears to be bathroom sealant on the gasket to seal it up

Mayo in breather
Now the failing gasket.

Ok so i want to carry on so i now take off the power steering and alternator belts and try to slacken the crankshaft pulley and no way is it moving. It even bent my extension bar. Ok so i order some tools camshaft locking tool the flywheel looking tool as the fifth gear mechanism of locking has too much play. Thought i may as well also order a compressor and impact wrench and ratchet. So i have everything i may need. While waiting i want to take off the camshaft cover and see whats inside. And this is where i think i see what confirms my first problem in the inlet manifold. The top of the camshaft area is full of may and i cant see any of it in the engine area at all or below the camshaft gasket only on top where the breather area is.

So now the questions to everyone do you think that what i have found means this is only a manifold inlet problem where water has leaked into this area through the inlet water pipe across the gasket. The water pump etc is all new and everything is now cleaned up. Do you think it is safe to assume this is the problem as i cant see any mayo below this area or in the oil i drained from the system. Should i put on a new inlet gasket camshaft gasket maybe but it looks new as do the camshaft seals and put it back together? Or is there a possibility that i should continue on and get down to the head off as well just to check? Bear in mind i haven't done any of this before but i don't want to have to strip it twice so advise would be great but i have bought 150 of tools it would be a shame not to use them
It has cleaned up fine so far though