I believe it's usually No 3 which fails, due to poor cooling. Could
this be your problem? The valvecover gasket may be a coincidental red
herring...

My 1.8 Bay burned through a piston behind the ring lands (slip-in
1916 big-bore kit, due to a warping cylinder wall, no doubt), but got
me the 180km home at 60mph on the other 3 pots! Engine was a writeoff
as soon as the piston failed ie not worth fixing, and I was damned if
I was going to catch a BUS home and then return to tow the van, when
I could drive it!

Apparently the stock watercooled Vanagon radiator WILL fit your van,
and the chassis cutouts are alreay there for coolant lines (remember,
the diesels were watercooled, and came out well before the
wasserboxer was available). This has been a thread on the list
before. Someone will be able to tell you what's what.

Just try to simplify the cooling plumbing... and the 1988-or-later
EJ/EG-series Subaru engines are just the thing. But go for at least
2.2 liters...