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Now I'm not 100% sure, and anyone correct me if I'm wrong, but it sounds like the 3.8 head gasket phonominon. The head gasket fails between the cylender and the coolant passage. This forces combustion gasses and other "yucky"stuff into the cooling system. The cooling system, in turn is overloaded with pressure, venting air and anything that gets in the way (including coolant that gets caught up in this mess, ending up in your resevoir).
A common sign of this, is there is no heat, and the temp guage "dances". It will overheat, then drop down, then overheat, ect...
To test this, first look at your engine oil. If it appears "milky", make it a VERY GOOD POINT not to drive it anyfurther (rod, main, and cam bearings hate water). Your next step would be to fill the cold cooling system up with coolant. Using a radiator pressure tester (if you don't have one, your local parts house normally rents them or tests for you), Mount the tester on the radiator, apply no pressure to cooling system. Start your car. If the pressure tester rises almost imediately, it is the heads/ gaskets. If the pressure rises above 16 PSI, Its the head/gaskets. <_<
This would be my best belifes, and if it is, that's a bummer dude!
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