Casting plug fell out of cylinder head, releasing water into the oil. Engine failed.

Update from Aug 22, 2016: Casting plug looks like a 16 mm freeze plug. Located in center of the head, between head bolts. If the plug is gone, the hole looks like a milled pocket for another head bolt, or an oil return. ((When aluminum is cast at the foundry, the mold leave holes connecting the oil and water passages. These holes are typically bored and threaded, and a threaded plug screwed in to seal. Peugeot just staked an aluminum plug into the hole, no threads.)) When the electric water pump failed on this vehicle, the engine developed a pocket of superheated air at the high spot (where the casting plug is located). A pocket of air needs to get burped, but the burping vent was over on the thermostat housing. Steam forced the plug out, and water poured into the valve train area and down to the oil pan. From there, the oil pump churned the mix into a froth. The creamy mixture could not effectively pump through the oil control solenoid. The engine stopped turning, and the owner noticed an oil pan full of water almost immediately.

In the repair shop, the missing plug was not noticed. Head gasket was changed, with new studs. Water still poured into the oil pan as fast as it was poured into the radiator overflow tank. The oil filter housing was pressure-checked for leaks and one-way valve operation. Water pumps, turbo water jacket, connector pipe all tested good, yet each time the radiator was filled, water poured through the windage tray. It must be a cracked engine. Removed valve cover, poured more water into the radiator, and only then noticed water coming from what appeared to be an oil return passage. Installed a custom threaded aluminum plug, no more leaks. A $12 plug, misdiagnosed as a bad head gasket (or worse).

" Blind Plug 11-11-7-526-568 “ ($12.44) and a hammer might be the fix for hundreds of complaints about MINI engines and creamy oil. Subject engine is an N18, R55 chassis with a March 2011 mfg date. 2011 MINI Cooper Clubman S turbo, 80,000 gentle miles. Oil changed every 3k, two valve cleanings. Stock instrumentation (idiot lights). Engineering note: Corporate Average Fuel Economy (CAFE) standards are set by the USGov. The oil pressure solenoid on the MINI engine is a fuel economy device. The oil pump is direct drive from the crank. By dumping "surplus" oil volume into the pan, fuel efficiency is improved. If the solenoid was not a part of the system, oil would flow under adverse conditions.

Direct Injection is also a CAFE tool, but at the expense of carbon buildup from the exhaust gas recirculation system. Non-direct injection engines use wet fuel to clean the valves; MINI owners pay for walnut shell service. The failure-prone 900 psi gasoline fuel pump is also a CAFE device; direct inject systems create a better mist of fuel.

The on-demand main water pump is a CAFE device, it only activates after the engine warms up. The French impregnated the drive belt with abrasive and made the water pump pulley from soft rubber. When things heat up, the soft rubber moves closer to the spinning belt. They touch, slip, touch again, and finally grip tightly. Until the belt loses its abrasive fiberglas coating, or the pulley ($150) gets slick.

32 MPG minus CAFE repair bills = 10 MPG.