Hi all, thanks for your replies. I was rushing to post this while multi tasking, so sorry about the missing info. Also had problems with posting the pictures, not sure why they posted like they did. Eddie, the SN is 4U1826, and it does have the bleed valve on the manifold, but I forgot to open it while I was filling the coolant in the radiator. I did open it after the fact, so for the most part I did have coolant in the manifold. I know the previous owner rebuilt this in the past from 3 other ponies, so it's possible he put a newer manifold on if this model originally didn't have the bleed valve. Kittylover, temps were taken in the area of the top of the head and and the manifold within a couple of inches from the head. When I pulled the manifold, the manifold gasket was stiff and stuck to the block in the area of the coolant passages on both sides. I ran the pony about 6 or 7 times for just a few minutes each time, and at idle to break it in. I first noticed the overheating when the new paint started smoking on #2 cylinder side of the manifold near the elbow that connects the coolant to the diesel engine. Shut down immediately and monitored with the infrared thermometer afterwards and shut down when it reached about 220, which only took a couple of minutes. The last two times that I ran the pony I was turning the diesel and there was no change in the temps. I've just replaced the fuel line from the tank to the transfer pump and added an inline filter, plus changed the fuel filters, so I need to get the air out of the system before the diesel runs. Also, when I pulled the pony, most of the coolant was trapped in the pony and had not drained when I drained the radiator. In hindsight, I should have drained it using the valve below the pony on the diesel engine. Thinking there was a blockage in this area, I blew air through the opening on the bellhousing and had good airflow coming out of both the radiator fill and the drain, so it doesn't look like there were blockages there, but I was still curious on why that didn't drain through the radiator. My gaskets should be in today, so I'll get it back together and try it again this weekend. I've been chatting with Neil, who has been extremely helpful (thanks Neil), and he suggests the timing issue too, so that's one of the things I have left to check.
I was a little concerned about the rod clearance, so thanks for the sanity check on it.