Re. Water in the gearbox oil: I would not disagree with any of the comments above. For what it is worth, given that you have already removed the subframe & Engine/gearbox assembly, it surely makes sense to split the gearbox from the engine, so that the clutch can be checked and (probably) replaced, unless you know that this job has been done.
I have read elsewhere that clutch release arms are prone to rusting and seizing. Given that your car was "Baptised", the chances that your clutch release arm has NOT started to corrode badly seems vanishingly small. I believe Mike Satur does an improved release arm with a grease nipple.
Once you have the gearbox out, you can look for signs of corrosion, and do at least a partial strip. There is good advice (3 pages with 7 photos) on this subject in Roger Parker's "MGF and TF Restoration Manual" The key point is that there is a circlip which MUST be removed before the main case can be lifted off. Once you have removed that, checking for corrosion should be easy and you will certainly be able to eliminate any remaining water and muck before a re-fill.
I have to say that I admire your determination to get that car refurbished! Hard to see it as an economically viable project, but I guess that is not the point!
Good Luck!