Pull it apart. Head goes to machine shop, block gets checked with a straigthedge to see if it's warped. My guess is that it is. General MO from what I've read is to helicoil/timesert the aluminum blocks, regardless of whether the threads are intact.
The smell in the oil is probably the by-products of combustion. I would guess the coolant smells that way too.
Honestly, you're probably best off sourcing a junkyard engine from a totaled car.