If it needs a head gasket, that sure seems to fit the definition of a project car to me. Looks like it is leaking oil into the coolant pretty bad. While the head is off, measure how far above the deck the #1 piston is sitting as compared to the rest. It should be just slightly above. If it is flush or below deck level, rod is bent. If that is the case, rotate engine so #1 is at the bottom, you will probably see the cross hatch worn off the front and back of the cylinder, and still visible on the sides. This indicates that its ovaled. You will then need to measure the cylinder to see if it is still within spec or too far out. If its still in spec, replace the rods and you should be good.