Hi guys, I have read the How-To thread on cooling system but I'm not sure about my 1990 3SGTE MR2 situation.
 
When I pulled the dipstick/snorkle on the cooland overflow path I found it silted up with sediment, presumably rust. It seemed to be blocking the gauze filter at the end of the snorkel which I cleaned out.  The radiator cap also has a sludge layer when I removed it.  And it comes back if I wipe it off.  So I read the MR2 manual section and watched a few YouTube coolant changes, bought coolant flush, demin water, red coolant and expected to be flushing the system a number of times.   I removed the undercovers and opened the main drains on the two front to rear coolant pipes and the coolant that I drained was a beautiful clear red coolant.
 
If the circulating coolant looks good any idea why the sludge is appearing on the radiator cap and the overflow path?  Or how I could get rid of it?  The how-to PDF doesn't get into this sort of complexity.
 
I haven't attempted any flushing until I understand this.
 
Thanks

Do NOT use the radiator flush without removing the hoses going to and from the radiator.
Also remove thermostat to allow a strong flow to happen.
The flush will loosen rust scale and other debris and it will be emulsified and carried straight to the smallest holes in the system. GUESS WHERE ??
Great that you haven't proceeded  prior to thinking it through.
Cooling system may have been neglected years ago allowing the corrosion to get established. Who knows?

Thanks Falcon

another thing you could check is the metal bypass hose that runs over the top of the gearbox,its prone to rusting.
 

 is rust the sign that previous coolant was water and not the real thing ?
or can you get rust with old coolant ?
I resumed that a flush involved the water pump (engine idling), but disconnecting the radiator would say otherwise.

Thanks for the tips.  It has almost certainly been run with water for a while going by the condition of the internals of some of the steel piping.
 
A leak I was chasing that drove me to the flush turned out to be from the flange of a small turret casting that connects to the radiator cap filler point and a couple of other hoses to turbo cooling etc and which bolts on top of another casting with temperature sensors etc to the LH side of the block.
 
Toyotas sealing method between the two castings is a rubber O-ring between the two however a previous owner had added multiple home-made gaskets between the two faces.  Falcon has pointed out how poorly this casting is connected to the lower casting in that it has two bolts but both are on one side.  This leads to leaks on the other side due to the uneven pressure when the seals age.  Or, as Falcon suggested, that people aren't careful with bolt torque settings.  I've looked at two engines and both have had sealing gunk added here so it might be a common  problem.
 
My latest problem is that, when I removed the two bolts one came out with a lot of alloy attached and the other with some.  I have a spare engine however I found that the same thing happened there.  30year old, what should I expect?  I wondered if I could drill out the holes and use longer bolts and nuts on the underside however the bolt hole on one side is blind.   Has anyone else had to fix this?  Tap out to a larger bolt size?  Threadsert?