On the compression test, I was getting good numbers, 180lbs unit I got to the cylinders with water in them, and the water was throwing off my compression numbers, so I stopped there.

It is most likely going to be the head gasket, you may be able to check the intake gasket on disassembly, but it is not likely the cause. With the heads off, have them crack tested, complete valve job may be a good idea depending on the hours, relatively cheap once the heads are off anyway, the head will need to be surfaced normally.

thanks wobble. What's a marina usually charge for that kind of work?

I had the exact same problem 2 weeks ago as you have now.Starboard exhaust riser leaking into the cylinders and port head gasket blew which allowed water into the cylinders as well.
Had the entire top end removed and found valves not seating properly.Good valve job,good intake and head gaskets and new Imco exhaust installed and all is good now.
If you do have water in the oil you need to do a couple oil changes asap.That water is tough on bearings.

worked on a 5.7 efi this week that ran hot 2 cracked heads one broken exhaust valve two blown head gaskets!! ran hot enough to burn exhaust hoses.

Thanks,
Was it exhibiting similar problems as mine?
estimated costs to fix something like that?

Here is the deal on the cost. If you know of a mechanic that can be trusted, then you have to do the work he wants done for the price he wants, in return if it's not right he takes care of it.

You could be looking at 1500-3000 per engine + any major parts that need replacement.

Now if you can remove and replace the heads yourself, the rest of the work without a new head could be less than $500 parts and machine work.

If you are not comfortable with this job consider pulling the motor yourself, which is fairly easy with a buddies help. This will save on the mechanics time, however he may not warranty his work if he doesn't do the whole job.

Good luck

Do you have to change the oil after overheating?

Why not change the oil ? You might be changing cranks rods and bearings. At least check the oil for signs of bearing debris and metal dust.
Water boils at 212 and expands into steam. This is not good and can lead to head gasket failure as well as actually burn a path between 2 cylinders as well as the head if severely overheated. For some reason usually the heat riser passage , this usually happens in the center cylinders. This steam also pushes hard and because of higher cylinder pressures it temporarily can stretch head bolts and may not seem to be the culprit and head and gasket may seem fine sometimes. Small cracks in the upper head bolt holes in the block indicate a severely overheated motor , and motor may have other issues as well.
When motor gets mad hot it actually seeks cool water and wants to suck it up the exhaust with vacuum. This could 'Splain rust in exhaust. Post some pics and some experts will tell you whats going on. BBB