Here is what I'm thinking. At this point I'm leaning towards a problem with the head. Here's why:
The owner had purchased an engine for this bike but he did not say why. He mentioned the PO before him had removed the current engine to replace stator and some other things. I can get the extra motor for a mere $200 or I can just purchase another head. I called my local mechanic and informed him of all this and he suspects an internal crack in the head. He could ship it off and have it checked but that would probably cost more than my other options on the table.
So, with all of this hanging in the balance, and scratching my head ( no pun intended), I should just purchase the engine. The cheapest head online runs around $80, and that's $80 that could go towards the engine.
Another reason why I believe it could be an internal issue with the head is because it had the exact same problem before I changed the head gasket, and right after I completed the new head gasket, it steamed right up again.
Thoughts?