It's been a long time I know, but when I had head issues with the 81 I'd usually drain 6-8 quarts of water then oil, or what resembled cappuccino if it'd been recently run.  I'm amazed that I was able to run it like that for 1 1/2 years in that truck, then had it last about 3 years in the 4by    Guess that's why I love toyotas!

Anyway, hopefully you got lucky and the water stayed below the bearings    I would definately start your search for another mill though, that is if the rest of it looks good enough to use anyway!