As I understand it the engine is actually running OK? This is a visual observation that recently took place? As Toungue Pirate suggested pressurize the system with the valve covers off and watch for pressure drop over an extended period of time. If the Cylinder sealing ring for the headgasket is intact I doubt any leakage would be heard through the spark plug holes. You could also do a cylinder leakdown to verify this, however if there was a failure of the rubber beads on the head gasket itself that separate the
oil and water passages, it would only show up under simulated operating pressure by forcing water into the
oil.
The alternative to a gasket failure or component falure (cracks) would be that the engine has been operated for short distances and not gotten up to temprature, maybe no PCV. One function of PCV is to remove moisture from crankcase, as well as fumes coming from the hot
oil. The vacuum also helps with ring seal.
Lastly is compromised gasket seal between head and manifold.