Not to insult you, but did you possibly leave a head bolt out? If so, it would have a lot of water flow through that opening, and run down through the oil drain openings in the head. What CadillacAl said made me think of this, and we all make mistakes. The timing cover could maybe be the problem, like you mentioned. That plate usually has rust pits in it, and it's hard to seal. Over at www.cad500parts.com, they have a new plate made of stainless steel for folks that can't use the old one because of pitted surfaces.