1996 manual transmission outbacks are the only 2.2 liter outbacks ever made, original post didn't say MT so we all just assumed it was a 2.5 since it's a blown headgasket.
That explains the 320,000 miles. Those routinely make high miles.
"Doesn't look correct" - what does that mean?
There's a leak? If there's a leak that should be fixed first. I'm not following this but it's either obviously a problem or not one at all.
Those tests aren't always conclusive, they give false negatives meaning they don't show a headgasket leak even if there is one.
It's pretty obvious it's a headgasket leak, the previous owner was chasing a headgasket leak, and now you bought it that way. It's been overheated enough I'm unsure I'd even want to keep the engine....but those headgaskets are super easy to replace. You can see all the headbolts just by popping the car hood and looking, they're external.