Hmm. Well, I used to run this engine in my '68 Cougar, years ago. It then sat in my garage for 5 years and I finally found this convertible-without-an-engine for it. Initially I ran the car with the points distributor (even though I had used the Duraspark in the '68) because I didn't feel like dealing with running the power wire until I knew everything else was working.
I never had this problem in my '68, same engine, same distributor.
After sitting for years, though, my water pump did die, so the one on there now is about brand new. Could a *tiny* amount of coolant residue produce that huge amount of corrosion? I mean, I've spilled coolant before and not noticed this happening. And when I spill, I always flush the area with plain water afterwards.
The only other difference, that I forgot to mention, is that when I had this engine in my '68, I was using an ENORMOUS braided ground strap that had been attached to the engine in its original donor car, a '73 Gran Torino Squire. I'm not using that now because I have the correct battery cables etc. BUT... the cables are all original and could be connecting poorly...could this be electrolysis caused by poor grounding?
you may have hit in right on the head. I would look for a current bleed such as cracked cap or something connected incorrectly. glycerine should not cause corrosion in itself but since it traps moisture and mixes well with water add current to that and you have the makings for great corrosion. add dissimiliar metal to the mix and it looks like what your experiencing is galvanic corrosion (disimiliar metal contact). you may also have a very very tiny crack or hole causing just a barely noticable amount of steam to escape. to stop it one of three things must be eliminated. the cathode... the anode... or the eletrolyte.