Hydrolock???

Looks like a common blown head gasket to me, skim cut the heads and buy new head gaskets. My Mazda head gasket looked like yours when I pulled it, it was original and the truck had 225000 miles on it......It was actually rusty. Blew between #1-2 and I drove it 35 miles home easy on the throttle as it was pinging like crazy. Nothing to lose on my part, turned out to have not damaged the head at all, just a new head gasket. My machine shop gets $20 for a skim cut, thats pretty cheap but Ive been going there for 8 years. Grinds valves for a buck a piece, but he rejects half I give him as they are found to be bent or burned (ex) beyond turning.