Checking the dipstick is a good start.
You need to bleed the air from the cooling system. There is a small valve on top of the thermostat housing that you open up to let the air out. Once you get a steady stream of coolant from it then you should be good.
As far as the sludge, that is most likely from the old leaking LIM gaskets and old Dexcool. Might be a good idea to backflush the heater core as well if there is a lot in it.
The headgaskets almost NEVER go on these motors, even if overheated for long periods of time.
My question is this- When you replaced the LIM gaskets did you dump a quart of oil into the lifter valley and let it drain down into the pan and then change the oil and filter BEFORE you fired it back up? You should have done this, then let it run for about 10-15 min, then change the oil and filter again w/ your chosen brand and call it good. This will ensure that any coolant that made it down into the oil from the work does not damage the bearings and cause them to spin, thus toasting the motor.
