Had to reread this one. I had a question, does this engine have the intake manifold that crosses over to the other side of the block? I see it does.
Look inside the block, under where that manifold attaches to the block. Right where you are showing leaking water. I've had one, this air shaping plastic piece fell into the block behind the intake valve. Pieces of that hard plastic got into the cylinder. She smokes like mad now but oil is cheap.
If it was mine, I would get a new Briggs manifold and gaskets. They are only a couple bucks. And yes that is a bad vacuum leak you are showing with water.
Do NOT over torque the 2 bolts on that manifold. That is what causes cracks in the plastic and vacuum leaks. Those are tiny screws that hold it on.
