It IS water coming out the tailpipe...
 

so that's likely to be a head gasket,and I'm guessing the revving engine during the slipping tranny helped it along. Any gasket replace tips?

If it's WATER coming out the tail pipe it's NOT a head gasket problem but the by-product of combustion (water IS a cumbustion by-product) condensing on the cold exhaust surfaces. The cooling system should have a mixture of water and anti-freeze in it and if that's what's coming out the tail pipe you might very well have a blown head gasket or worse.

Marshall

on a gasser when you have little bits of water coming out, that usually means you have it perfectly tuned. i dont know if its the same for diesels though.

Matt,

If you don't have to add coolant, you head gasket is not leaking.

P E H