Hey Spud
Deal with the engine gearbox as 2 seperate compartments.
The gearbox is vented by a 4mm plastic tube on LHS case up near the rear of the fuel tap. Is it blocked?
I deliberatly overfill my gearbox & it vents oil out of here to the level it wants.
The engine is not vented as it is a 2 stroke & relies on primary compression which has oozed from your base gasket (black mark)
Water in the engine is usually from a blocked airbox drain. take the airfiletr out & have a look in the bottom.
Try tightening the base gasket bolts before you go for a complete strip.
If you do strip use the same thickness as fitted. The bike was running fine before right!?
Changing the base thickness will vary the exhaust port timing !!!!
Leaking exhaust, just torque the bolts up after lubricating them.
For a waterlogged engine take the sparkplug out & turn the bike upside down. Yes really, been there done that.
I will be riding at monkins farm if you want to chat, I was a bike mechanic before I found a job that paid properly.
Cheers