Unless the truck has been sitting outside with the valve cover and hood off, there shouldn't be any way for water to get into the the oil pan from outside. I would guess either the timing cover was eaten through by the timing chain, the block wasn't drained when he replaced the head, he cracked the head when he bolted it on, or put possible put the HG on wrong. I would do a thorough inspection, for $300 if the rest of the Runner is in good shape, even with a complete rebuild of the block, you are still money ahead.
