Mate, reading this makes me want to assume the fetal position and cry..
GQ's a great, but give me a cherokee anyday.
Mate, if you're loosing water, your motor is drinking it.
You are overheating because you are loosing all the pressure in you're system (pressure being the reason it doesn't flashboil at the block)
The cast iron motors are fantastic, i've never been able to overheat another motor so many times and then drive off with nothing wrong
the XJ motor swap, if it's easy enough will solve your problems, I'd rather fix a head gasket then swap a motor though