Mike,
       What you have described, right down to the James Bond analogy, is
exactly what happened to the 85 Vanagon I gave to our son. I mean exactly.
Before he could get it to my ACVW mechanic it gave up the ghost. As a matter
of fact this happened enroute to the mechanic. Being an ACVW wrench head, he
really didn't want to deal with this beast & I found another mechanic that
did. He said that most likely that it had broken a rod. Oil & water
everywhere.
       You may recall about a week or 2 ago I solicited the list for advise
as to where I could buy a reman Vanagon engine or should I explore the world
of a Subaru transplant. Anyway, don't drive it until you get it fixed or
you'll end up like me...A blown engine with replacements difficult to find &
expensive.

Tom