The water pump can't leak oil into the Opti. The Opti seal in the timing cover can leak oil into the back of the Opti. The water pump driveshaft seal can leak oil out of the timing cover, and the oil could run down on the outside of the Opti. Both those seals should have been replaced with the water pump install and the Opti install.

Did you use new clamps on the hoses? What does the coolant temp gauge in the dash indicate when the engine is fully warmed up and the hoses slip off? If the engine is overheating the pressure can increase. If it overheated to the point where you blew a head gasket, pressure can build quickly. The radiator cap is rated at 18 PSI. That should prevent the pressure in the cooling system from exceeding 18 PSI. Keep an eye on the coolant temp. Check the cap with a pressure tester.

Are you sure you assembled the water pump driveshaft correctly? Is the coolant temp sensor in the water pump connected? Are the radiator fans running correctly - first fan (or both on low speed) at 226°F, second fan (or both on high speed) at 235°F? Fan operation varies in 1994 based on early production (fan 1/fan 2) or late production (both low/both high).

 

The temp gage never gets above half way so it's not overheating and the radiator fans never kick on. The coolant temperature sensor is infact connected.

 

I suppose I failed to mention I replaced the coolant level sensor as well. The hoses seem to be all on and the ones that were loose the previous time are still on the fittings correctly. This time the coolant level sensor had popped off so I guess I failed to secure it properly.

 

What kind of clamps did you use on the hoses that popped off? Are the water pump ends of the hoses popping off? We’re the water pump/thermostat housing connections oily or greasy? Did you swap your thermostat and housing from the old pump? Possible the t’stat is upside down?

Just throwing out random thoughts. In 20+ years on this site, can’t recall seeing this problem before. Never had anything similar in the 27+ years I owned my 94.

Sounds like a pressure problem, and this time the level sensor relieved the pressure.

 

I was not the one that installed the new thermostat but it was not taken from the old water pump. There is a chance that it is installed up side down. The hose clamps that were used were the original screw style that were already on the hose before replacing the water pump

 

Also be sure the new t’stat is the correct LT1 specific type. Can’t use a normal small block Chevy t’stat.

http://shbox.com/1/tstat.jpg

The original clamps, when the car left the factory were spring type.

http://shbox.com/1/bleeders.jpg

http://shbox.com/1/temp_sensor1.jpg

 

It appears that the coolant is not draining to the reservoir when the coolant level gets too high

 

The cap controls that. You can test the cap for the proper release pressure (18 PSI) with an adapter on a radiator pressure tester. Auto parts shop might test it so they can sell you a new cap.

On an LT1 all air has to be bled from the coolant, and the radiator filled to the very top (into the cap housing). As the coolant heats up it expands and the vapor pressure increases. The cap has to open the allow that expansion, or something has got to give.

 

Tonight we have put all the hoses and the level sensor back on and bled the air. We drove it around for about 40 mins and no problem with level or anything popping off. I will update this when I drive it in the morning - it tends to only want to not work properly on my way to school.