Thanks for the info Andrew. Three head gaskets one new head and a head stud kit later I found the crack. It almost seems the head bolt hole was clogged with dirt and the head bolt was tighten down and bottom out on the dirt cracking the block. I chased the threads with a tap and installed the studs by hand. The crack was hard to find due to the IP bracket in front of it.
It is possible to hydro lock the stud in the hole if it has a liquid in it. That could cause it to crack.
Its very possible. I watched it happen on a Series 60 Detroit. It wasn't the head bolt hole but one it the gear case. It got hydro locked and busted a chunk off and sent it flyin across the shop.
In this case it could have been only slightly cracked from when the original head bolts were used and then grew form there. I'm sure with cracks that big a popping noise would have been heard.
I think the IP bracket bolt had dirt in it and started the crack. They were very hard to get out.
Always, always blow all holes with compressed air and use a tap and then blow again to get all grit and dirt out of the way.