Water in oil after rebuild - looking for guidance

I've tracked down a couple small coolant leaks and have slowed the pressure test leak to about .5 psi over 15 minutes, but I can also see it leaking inside the passenger side from the heater core area. A drip every 2 seconds or so under pressure. If there is an internal engine leak it can't be very big (at least with a cold motor).

I've been changing the oil after running it for a few minutes each time, now on the 4th change and it seems to be staying clearer each time. The oil that is in there now I have about 10 - 15 minutes of full temp driving and the oil hasn't turned white or risen in quantity. Although, I'm still getting bad mayo in the valve covers.

I have a theory of what I did. When I first filled the coolant system, I did using straight water to check for leaks. The truck was parked at a slight upward angle. Everything filled and looked good for a few minutes till i heard water running off the back of the intake manifold down the bellhousing. I had forgotten to tighten my water temp sensor and water was running out of it. Long enough to fill the lower area of the intake and down the back of the motor. I never thought anything of it and tightened up the sensor, leak stopped. What I've thought of since then is I didn't have the distributor tightened down (clamp bolted on, but would still spin) with the intention of adjusting the timing first thing after startup.. I'm hoping I just ran a bunch of water past the o-ring into the distributor opening and am slowly working it out of the motor. I only have one vent in one of the valve covers but have some pieces on the way to setup a PCV system... I'm really hoping its just residual moister and lack of PCV is causing the mayo that is still forming..