It's hard to tell exactly what the causes where for all the various repairs on this bike. My guess is the weep hole on the water pump started to leak. When this happens it means the internal gaskets on the pump are bad. I believe a previous handler thought the external seals where bad so they added RTV gasket to the seal. When this didn't fix the problem they added JB weld to the bottom of the pump where the fluid was dripping.
Anyway, the internal seals on the pump are bad. The pump in not rebuildable (dumb), it needs to be completely replaced. Honda has discontinued the pump. There are none available on eBay.
While disassembling the engine we managed to break a cam (that's another story). There are loose pieces of RTV gasket all through the engine. All of these things led me to look for a new engine, and I've bought on in Missouri for only $26!!! (http://www.ebay.com/itm/150803817497
I'm going on a trip to Georgia later this month so I'll be driving through the area and I can pick it up. The engine is out of an '86 Shadow (still 500cc) and I believe it is identical to the '84 Ascot, but that's going to be a bit of a gamble.
Thanks to Redburn for picking up the engine and rcjhk for volunteering as well.
If this works out it will reduce the repair costs of The Loser by about $450, and frankly, without a cheap engine like this, The Loser would be in great danger of becoming a parts bike. I'm keeping my fingers crossed that this will all work out.