Bite the bullet and get the head off and down to the shop. With water in the exhaust the head will have to come off sooner or later. May as well get brave. A good shop will do a crack test first and tell you if it worth spending more cash on that head or get a replacement. Mine does those free for me. The rebuild and machining plus gasket set leave me about $600 poorer.
Good - Fast - Cheap: Pick any two.
E23 735i; E30 318i; E32 735iL (X 2 - 1 White and 1 Light Blue); E34 535i; E38 735iL; R50 Cooper; R55 Cooper Clubman.
E21 318i; E32 735iL; E34 535i; E38 730iL; E53 4.4i