Well I finally bit the bullet and replaced the cylinder head and gasket this week and it seems to have cured it. I still don't know whether it's a crack in the head or gasket failure though. I will get the old head pressure tested at some point just out of curiosity.
I suspect the head had been off before though as it all came apart very easily with the gasket staying completely intact. The only odd thing was that No. 2 cylinder seemed to be a whole lot cleaner than the other but I don't know whether that was me gripping it to lift it or something else. There was also evidence of water contamination around one of the bolts and the gasket area around it but it didn't seem to penetrate to any of the bores. Anyway, a few pictures.
Damage to No.4 piston from an unknown cause.

Head bolts, notice the one rusty bolt.

The head, notice the rusty bolt hole at the top second from left, also the clean valve faces of No.2 cylinder.

It now appears to be cured, no pressurised coolant and normal running temperatures (which it had before).
This was a challenge though as the engine has been modified so much that I had no timing marks to set the valve timing by. You shouldn't need to I know, but whilst trying to hold a 37Kg head at virtually arms length I broke the cam sprocket support off the top of the chain guide. That allowed the sprocket to drop and the chain to fall off the crank. Then I discovered that the timing mark for the cam sprocket is also on the bit I broke off. So it's been timed by feel, eyesight and guestimation.
The broken bit!

So after all this effort I'm going to run it for a while and see how it behaves. If it goes wrong again I will drive it down to the crusher myself!!
I even got round to adjusting the head light height and replacing the batteries in the alarm power sounder, still doesn't make any noise though!

Anyway, now this is done it gives me the chance to build the engine that I need to bolt my twin turbos to for my Monza!
