Here is a shot of where they go in the engine. A rotor housing would then go on to of this sealing the combustion chamber. The coolant seals are the orange ones.

 

my bad, jspecracer7 is right typed it in wrong

 

Most likely your also going to need new Irons. Like the one in that picture. Due to the fact that they have been overheated, probably several times, there is a pretty good chance they are shot.When they get really hot, the metal warps, rendering them unuseable. But your'll just have to wait till you get it open to see everything thats wrong.

 

ARe you taking "everything" apart to get to the water seals (o-rings)? Can you leave the rotors and rotor housings alone?

 

NOPE, it all has to come apart!

 

nope.

 

My orange coolant seals are further out then the black one and you can see it squeezing through the cracks between the housings. I haven't opened up the block but does this mean the housings are warped?

 

Use a straight edge and lay it across the housing to check if they are warped. Not sure of the measurement though. Where the seals meet the plate if you can catch it with your figner nail they are bad.

 

You should never be able to see the coolant rings without opening it up. I doubt that is really what your seeing, but if in some wierd case it is, that engine is definately shot.

 

You're probably just seeing the rtv silicone used with the seals when the motor was put together last...