Either the lower intake manifold gasket failed and water got into the intake port and the crankcase, or you blew a head gasket, and the motor hydraulic action of the water cannot be compresses. Or the valve dropped down into the cylinder and punched a hole in the block allowing water into that cylinder. It looks like either the retainer or the keepers failed and allowed the valve to drop. Either way, don't waste time working on it, just replace with another known good engine.