If you have got the crank, cam, lifters and pistons, out of the block. You got it made, already.
Closely inspect the block or, have that done. If everything is sound, bore it .030, get your parts and assemble it. You can up grade it with with crank, rods to 332 or 347 CI, if you want.
Do the same with the heads and if you want a lot more HP, spend the money on them and the cam.
As to the water, it may have blown a head gasket or, check your timing cover, it could have a hole, eaten threw the water passage.