Kinda hard to tell from the images if the head gasket was leaking. It's either a bad head gasket or a cracked head causing the leak. I'd have the head checked for cracks.

The intake gasket has been replaced at some point, and it was not leaking. That gasket was made by Victor/Reinz and it's an OEM style gasket, (plastic frame with silicone seal). When you reassemble it, use a Felpro gasket set #MS98002T. It has been redesigned and it's a much better gasket.

As mentioned, if the main, rod and cam bearings are ok, you can probably get by lightly honing the cylinder to remove the surface rust.

 

Hey guys sorry I've haven't replied in a while. I got the head pressure checked and it had 2 cracks in it! Thanks for all the replies and the help! I'd be a ****ty mechanic if it weren't for the internet!!!

 

So now that you found that have the head with cracks replaced and buy a matching set if you can.Also clean up that intake manifold real good and replace the gasket.Too bad we dont live near each other I have a good set of vortec heads I would like to sell.