First, a little about me..

I am a new Camaro owner (98 3.8 L w/68k miles)... though I had a 92' Firebird as my first car. I am a novice mechanic who likes to do his own repairs... and who almost always ends up with more problems when than anticipated when doing any work on cars (see below)... though I doubt that's uncommon. :P I bought the Camaro as a fun car to drive in the summer months. I didn't have a great idea of it's service history so am going through a lot of tune-up items right now.. which leads me into my issues:

1. I performed a radiator flush and 'back flushed' it by installing a kit by Peak into the heater inlet hose. While I had the hose running I noticed a leak where the heater inlet hose goes into the engine. I unscrewed the plastic cover to reveal what appears to be some janky fix (red gasket crap)... but I could be wrong. I took a pic:

http://1drv.ms/1KUkgtS

.. my question is, how best to repair this leak? Is that red crap normal or did someone do a half-arsed fix?

2. Another problem? I started the engine and turned the heat up to high while running the garden hose (per the instructions on Peak flush and kill kit), and when I did so the engine revved from high to low RPM's a couple times and then died. Did I do something bad?

3. Finally, before flushing with the hose, I had filled the system with distilled water and ran it for 10 minutes with the heat on high... while doing so, I noticed some fine white smoke (abnormal) coming out of the exhaust for a little while, and then it stopped. Is this normal when you are flushing a coolant system or is it looking like I have the infamous upper/lower take manifold failure?

I should mention that the reason for the flush is because the coolant overflow and radiator cap had brown gunky crap... which I think is a sign the Dex-cool has never been changed out. I am replacing the dex-cool with green stuff... but don't want to put in new coolant until I'm sure the heater inlet hose isn't leaking!

Sorry for all the questions... I know I'm a noob on this forum, but it's only because I just got the Camaro!

Thanks!