Rob, unfortunately one of a couple of things could have happened. The problem arises from the fact water is incompressible. Diesels operate off a very high compression, which requires a LOT of force to get past the water. the result will be one of the following.
1) Your Con-rods have bent/snapped Solution. Insurance claim. Throw away engine, get a new, refurb or salvaged engine. From the clankiness of the engine, I would say that this is possible.
2) Blown Gasket. Not too much of a problem to replace, but are you sure there is no deeper-rooted damage? are the con rods stressed and going to fail further down the line as a result? Estimate for repair here, between £800-1000 depending on where you take it and how in-depth the inspection goes.
Paul Smith
July 2007