Head Erosion XJ6 4.2

I have posted this question on another Jaguar Forum, so my apologies to those who have seen this post elsewhere. Recently I sandblasted the head of an engine salvaged from a 1971 XJ6.
Note the severe erosion on no.3 cylinder extending around the valve seat.
How does this happen? (the block has the usual cracks between bores).
Is this head any use?

Looks like steam erosion: if the seats are not undermined by the erosion, its usable.

Hard to tell, but the area of the seats look as if they are a bit eroded, in the aluminum around them. Probably should be removed, welded, remachined and new seats installed.

Thanks Paul,
That it was caused by steam is what I thought. On disassembly, the head came off easily, and the gasket appeared quite new. I suppose that the car had been used for some time with a blown gasket between the bores. I may junk this whole engine now.