Just to conclude the thread.
My mate told me the engine is back together and seems ok.
The owner took the head to a engine reconditioning place, they checked head and gave it a light skim. New gasket etc and all seems ok.
So it appears the head gasket was the problem despite there being no obvious signs.
That said I didn't personally see how much steam was coming out of the exhaust or monitor the water loss, and you know how these things seem to get exaggerated!
Thanks for the input.