Cracked Jug - Scored Piston - Winterization Problem?

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jwgagnon

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I have a 1996 Sportster with a 717 engine. Toward the end of summer, I started noticing excess water in the engine bay and my bilge running more than normal. When I looked in the engine bay, it appeared to me like it was leaking at the gasket where the exhaust manifold was. After taking off the manifold I noticed that in actuality, one of the Jugs was cracked:

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It also looks like water got into the cylinder:



IMG_4717.JPG




And caused damage to the piston:


IMG_4716.JPG


My question is, could this be caused by improper winterization? The only reason I ask is that last winter I decided to take my 96 Sportster to a different dealer to winterize and I remember this spring, when first starting it I noticed it was very hard to turn over, almost like the starter was going (it wasn't, this was replaced a year ago). Is it worth going back to the dealer and confronting them about this? Thanks.
 
The dealer is not taking responsibility for the cracked jug. They claim that anything dropped off for winterization after October 1st ( i dropped it off on October 10th last year), they are not responsible for. So now im stuck with this:

Water Crankcase.JPGIm assuming by milky color this would indicate water mixed with oil? Since its sat in here for about a month now, am i needing to replace the crackcase? or should i siphon it out and replace with good oil?
 
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