Thanks for your responses, what tests should I carry out?
More details of my problem: I didn't mention that this was the second time I noticed a puddle of oily liquid under the car and light brown creamy fudge in the coolant overflow container, only the first time the car did not overheat (just noticed the puddle the next day). I emptied out the overflow tank, put a little coolant into it and also added oil to the pan (was at the low level on the dip stick). Drove the car around normally over about a week (around 300 km) before the overheating problem occurred.
What checks do you suggest I try to isolate the problem further? I've worked on cars before and have tools including a compression tester. I rang a local shop and they mentioned $400 as a minimum just to have a look to see what the problem may be. I'm going to check out myself first, so please give me some pointers on what to check! I'm going to drain the radiator and o'flow tank of that creamy stuff and refill with water as a start point. The fact that the car ran normally (no loss in performance etc) for a week would suggest that it's not a blown head gasket? Also a coolant gain (oil getting into coolant, not a coolant loss) would suggest there are no external (I checked) or internal coolant leaks into engine, but an oil leak into the cooling system?
Tia.
I ended up removing the head--what I found..
I figured the block sealer wouldn't work as I have oil in the coolant, not coolant in oil- so the sealer would be pushed out of any leak rather than push in and sealing it. labman suggested an oil leak sealer- I researched these and what they do is to swell up oil seals that have shrunk with ageing but will not fix any cracks in the head or block or fix leaking gaskets. Weighing things up I figured I had little choice but to remove the head (what I was dreading to do!) and have a look. When I got the head off there was this gooey creamy mess everywhere- the whole cooling system had this instead of coolant! OK big cleanup job ahead if I ever get this car back on the road. Cleaned up the mess hoping to find a damaged gasket, a crack in the head or block... but nothing. Head gasket was perfect, no visible signs of any cracks or corrosion in the head/block. I ended up ringing around and this engine place said he was 95% sure it would be a crack in the head, to bring it down and he would do a pressure test and show me the leak. To cut a long story short there was a leak (only a tiny one) and I ended up buying a reconditioned head. Car is now back on the road - getting all the oil out of the cooling system is going to be my next challenge. Flushed the radiator and engine and still more gooey stuff at top of radiator. I'm going to get it power flushed- guy at the radiator place said oil will remain in the cooling system even after the power flush and it would take several more flushes to rid the system of the oil. Such is life, but I'm glad I found the problem -hopefully that was the only one!