If there is a crack on the intake manifold side of the intake valve, your compression would be good, and the cylinder would be steam cleaned. This crack could be at the intake manifold, or in the head upstream from the combustion chamber. I dont see a water passage at the #3 cylinder in the head. Water could be entering the combustion chamber at the head gasket. A leakdown and compression check may not show this. It may manifest itself only when the system is really hot.
Here are a couple images to assist with the discussions, as a visual aid (from the exhaust cross-over thread):
A leak at the exhaust manifold may steam clean the cylinder, but gasses are flowing out of that cylinder into the exhaust manifold, so I dont really see how it could effectively steam it much while under way. Perhaps some leak in during sitting, and steam upon startup, would steam clean the cylinder. A leak in the exhaust manifold would surely cause steam while under way.
You know, if this was happening in your Corvette, or in a (heaven forbid) Jaguar, the solution would be a can of Bars Leak, probably. The Jag dealerships even were told by the factory to add that stuff at routine service calls, lol, but the Brits never really seemed to be able to put two pieces of metal together and keep oil in, so it stands to reason they couldnˇ¦t keep water out either.
Itˇ¦s an odd set of criteria: steamed #3, good compression, no water in the oil. Water can only get to the combustion chamber from the intake manifold, head, head gasket, crack in the cylinder wall, or perhaps through the exhaust manifold. Those intake runners cross by one another, and its not outside the realm of possibilities that water could be entering somewhere in the runners. I keep looking at the image of the intake manifold and Im trying to see just where water could enter, but unless Im overlooking something, I cant see how this would be happening.
Good luck on the hunt for a solution. Keep us posted on your progress. I also have a little steam coming from my Starboard motor, and Im probably going to be pulling those manifolds off too. Something to look forward to (not) !
Regards, Paul