First of all, I would like to thank each of you for your responses. Now to shed some insight on what happened. I purchased this engine as a long block from a reputable Machine Shop that builds hundreds of engines. It turns out that it was indeed water in the oil. Fortunately I did not run the engine but 20 miles before problem showed up and did not crank it until resolving the problem. After talking with warranty man atmachine shop, he suggested that before we pull the engine back out and replace it to try reinstalling the lower intake. This is the part that everyone needs to pay attention to!! 4.0L pushrod engines intake manifolds have to be installed with the heads and torqued with them if the heads have been removed as in the case of a rebuild. However, If you purchase a long block as I did then "DO NOT" use the Torque pattern that is in the Haynes Manual. Torque the intake in 3 steps starting with the middle bolts and working outward. The most inportant part of all and the manual does not tell you this. RETORQUE the bolts after you crank the engine and allow it to warm up. With mine the bolts turned another quarter turn after the engine warmed. I did this according to there recommendations of the rebuilder and have now gotten about 500 miles on the engine and it has pretty clear amber colored oil like it should have. Hope this helps someone else that might run into the same down the road.