Ok here are the scenarios we have:
1) When we intially drained the oil, we didn't remove the oil filter. There was most certainly water and antifreeze in it, which could cause the milkiness.
2) The exhaust manifold is not sealed well
3) The riser is not sealed well
4) We have a cracked block.
So tonight, we'll drain all the oil and replace the oil filter with a new one. Then, we'll rinse the valve cover with new oil and let that pull the milkiness down and out of the oil pan. We'll discard this "bad oil". Then, we'll accurately measure 4 quarts, and add 4 quarts to the system. (We didn't accurately add oil the first time after removing the anti-freeze filled oil).
We'll keep y'all posted. Hopefully we don't have to buy a rebuilt engine
-John