My question is, how do we know headgaskets are gone?

Compression test on each cylinder usually does it.

If he refills his cooling system with water(temporarily as a test) he can use a chemical detection kit to test the head gaskets. This test can be done while the engine is cold all the way up to hot to eliminate hot/cold differences.

I'll do a compression test ASAP. I just made the assumption that the head gasket was leaking when I lost power and saw the coolant.

sounds hydrolocked. once you confirm it with compression test i would replace the whole upper manifold if they are like the series 2 ones they get spongy and brittle. its dorman 615179 it says for 93-94 bonnie

I Am still thinking we think too much is wrong, more so than actually is.

Here is my guess on how it went down:
engine starts running out of coolant from a leak, catastrophic or otherwise
engine coolant temp skyrockets
rest of coolant boils out (massive steam show)
cylinder temperatures continue to escalate, bringing on preignition, causing lost power
computer detects recurring preignition, pulls knock retard to full (bad power loss here)

if i am correct, you need to identify and correct/pacify your source of coolant loss, and determine what damage was caused, if any, by the overheat. These engines can take a lot of abuse, and can survive a lot of heat, but if it did take overheat damage, you need to be sure you didnt crack the heads. Again, series 1 isnt nearly as quick to ingest coolant as series 2 is, but a quick turnover with no sparkplugs will clear any concerns of that.

to clarify, series 1 uims can get brittle with age, however their design favors the coolant leaking externally upon failure. Also look at the coolant bypass inlet in the lim. It should be right under the alternator. Those came stock plastic, and is due to break if original. The bypass hose runs to the top of the waterpump.

time and heat are not good for the plastic, not sure why they use them other to save gm money. but mine even not being original was replaced the first time at about 50k, this last time at about 180k it was blown out by the tb area. regardless of design and what happens later the plastic is not trustworthy on a car that has some age and should be replaced

I still think its an LIM gasket, but if you are going to tear it down that far I agree with Justing on changing the upper manifold. If it hasn't failed yet, it will as some point.

Starting with a compression test is the logical first step.

ok, I didn't have too much time but here are the numbers from the first bank

5-90
3-80
1-130

poop. you try it again with a teaspoon of oil to see if the rings are bad?