You're flushing it without the thermostat installed, correct??? Need to leave thermostat out, install housing, run the truck, drain....you can even drain it continually from the radiator petcock while adding water (even from a garden hose during the flush) and do it until it's all clear. Rusting overnight? LOL!

 

If you have "rusty and gross sludge" trapped in the engine, it's best to fab a setup where you can attach the garden hose straight to the radiator hoses (leaving the other disconnected of course) with the thermostat out, and repeat for heater core and radiator and let water pressure do it's thing. If you don't care about your electric bill, this is best done straight from the water heater.

 

Distilled water is what came in the truck from the factory, and is what is in all 50/50 premix products. With tap water, you do know it contains corrosives like chlorine. You don't know, however, what the mineral level is, so you have no idea if it really will be "better" than distilled wrt. absorbing minerals from the block vs. DEPOSITING minerals all throughout the system. There might be some exact mineral level that will miraculously cause the coolant not to absorb any minerals from the block, and not deposit any minerals anywhere either, but I'd love to see a listing for the testing device that tells you what that mineral content is.

But as said, besides the heat transfer thing (irrelevant to this thread), Brad's points are the most relevant. Drain one more time, flush 1/2 times 'till it runs clear, drain again, and fill with distilled water and anti-freeze to obtain at least a 50/50 mix.

 

When I suggested not flushing with distilled water I was specifically referring to the problem of flushing with distilled water and leaving it in the block overnight contributing to the rusty color when drained. Once distilled water is mixed with antifreeze you no longer have distilled water. You have water, ethylene glycol (usually, sometimes propylene glycol) and a bunch of different additives.
Having worked in an industry where water quality was important (latex paint production) and cost was closely controlled, my guess is that the factory used de-ionized water rather than distilled. It is cheaper and relatively free of minerals. If they will save a penny on washers, to keep costs down, my bet is they would do the same for water.

 

Does a 4.9 have allen head drain plugs in the skirt like a small block?

If so, I'd try get those out, cause that's where the mud lives.

 

Yes...yes it does! On the lower passenger side of block.

 

I had a similar problem on my son's '95 F150, when we got it the system was badly rusted. I flushed it 3 times and it still kept getting crudded up with rust. I finally decided to replace the radiator as it would not come clean and this solved the problem.