Sorry it took me so long to get back to these great responses. I'm still fearing the dreaded head gasket diagnosis but I want to get all the air out before I jump to that conclusion. The question I still have is...where did all the water go in the first place? I realize that replacing the coolant last fall and not getting all the air out of the system may be the root cause of all this but I'm hoping that using these techniques will solve the problem. Thanks guys.

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1987 300E
1967 Jaguar E-type Series I, 2+2