I just put a rebuilt b16 in. Now, using plain water and looking in the radiator cap, there is a milky white fluid in the water. It doesn't mix with the water, so it seems like it could be oil. But wouldn't a headgasket leak produce bubbles when it's running? So...could it be anything other than oil? The other possible source of oil would be just a dirty rear main water pipe, from when I was rebuilding it and turning it over and sometimes old oil would seep out randomly. I just didn't think oil turned white in plain water.
If there's not reason to believe it's a headgasket leak, would there be any reason it's not safe to drive?

 

It's oil. slim possibility of contamination from rebuilding (very slim). flush system several times if problem still persists take apart again as you have some problems. You will not always get bubbles from a blown head gasket. Sorry to give you the bad news. Goodluck

 

run some good coolant flush like the permatex brand you can get form o'reillys in a tall round white quart bottle, then run some K&W block seal in it. that should take care of anything, unless theres a large hole in your block.