Speaking of sludge, I'm sure you know that sludge can be a good indicator of several issues, but I thought I'd add a few observations for the benefit of others:
When I pulled the oil pan off the T-245 in my M37, I was happy to find how clean everything was. There was no sludge buildup on the walls of the block itself or anywhere else, which suggests a history of even cooling and an operable thermostat (and possibly a history of detergent oil as well). Running too cold can inhibit evaporation of moisture from the oil and atmosphere inside the block, and can lead to condensation and sludge buildup on any relatively cool surface. Further, an uneven buildup of sludge on different areas of the the inside of the block might suggest uneven water distribution in the cooling system.
Even though things looked good, I still wanted to get a more complete picture of the state of the cooling system, so I pulled off the water pump and extracted the water distribution tube, which I think is a pretty good diagnostic 'tool.' If there is a lot of rust in the system, the slots in a distribution tube are often among the first orifices to be blocked by rust flakes, and the degree of corrosion of the tube itself is a fairly good indicator as to whether the engine had a history of proper anti-freeze with anti-corrosion additives. Mine was pretty clean, without a lot of corrosion, but as long as I had it out, I decided to replace it when I do the planned engine overhaul...probably this coming summer.
New water distribution tubes are available in stainless steel. The old tube can usually be removed with a metal strap with a hook at the end...kind of like a 'slim jim.' If you buy a new distribution tube, it might even come with a removal tool.
A friend with an M37 pulled off his water pump and told me that it didn't have a water distribution tube. I told him to look down the passage with a flashlight, whereupon he saw the remains of the distribution tube; the front of the tube had completely corroded away!