Hang on a sec. Is all the coolant black and sludgy? Are you seeing a black sludge in the over flow bottle? Perhaps on the radiator cap? If so, that'* not oil. You have Dexcool radiator fluid. If air get in the cooling system is can sludge up a little bit. If you topped it off with other coolant other then Dexcool or one that says any color. It will sludge up black. Is this a possibility?

That could be a possibility as well. There was sludge in the overflow tank and in the radiator although it wasn't really black, more brown but definitely had an "oily" top layer. I've only had the car for a month or so and do not know its history. The coolant itself was certainly not the typical greenish color. I think the car has been mostly sitting for the past 2 years or so and has only 73k on it.

It should be noted however that this vehicle was not originally equipped with DexCool. Has it been switched over? What did they put in it after they replaced the gasket originally?

What color is the coolant?

I would say the color of mud, more brown color and not reddish.

And yes, this vehicle originally did not have Dexcool but it may have been added at some point - I don't know.

At this point since I have the heads off I am checking the valves and giving everything a good cleaning.

When done I will have new head gaskets, LIM gaskets and a new UIM. So if there is still a leak, it should be in the radiator I would say. Am I missing any other possibilities?

The line that enters the radiator I am assuming to be an engine oil line - am I correct or is that a transmission fluid line?

If there is one pair of lines going to the radiator, it is the transmission cooler, if there is a second pair, it goes to the oil cooler. Oil coolers only happened on the L67 from what I have seen however.