So I have a 1998 OUtback Ltd. with the 2.5 DOHC. Is that the phase II and what is the usual gasket failure with these engines?

 

I'm just going to reseal the whole engine....like:

Head Gaskets

Rear Main

ALready did front cam and crank

Valve covers

Water Pump

Oil Pan

 

I've never done this job on an EJ. What should I know about these engines? Is there any tips/tricks I should know. I'm tired of not knowing the true condition of the engine, I bought this car a couple months ago and am starting to run into some problems like oil leak, overheating, and I just need to have a peace of mind.

No, you have the Phase I engine, the engine that is known to suffer from frequent internal head gasket failures. However, you may not have a head gasket failure. There is a huge amount of information on this subject if you do a search. Whatever you do, do not allow your Phase I engine to overheat. This all aluminum engine takes overheating very poorly. You may simply have air in the cooling system, or you may have blown head gaskets. I'm not certain, but I believe there is also a a plastic oil separator that is probably leaking oil. If you decide to replace the head gaskets and the oil separator is leaking you might want to pull the engine.