Your headgasket is blown.
You most likely have a cracked head.
I would recomond a new engine swap; LKD locally has engines you pull it for about $400.

I would be willing to help you swap in a engine, you're lucky you don't have an EJ25D.
I would swap in an EJ22E, 20hp loss, but you will have a more reliable engine. I've sold two in the past for less then $300 for a long block; and you can pop them out of a earlier pre 95'/obd2 legacy and swap it over to your 98 as long as you swap the engine wire harness over. :] It will also give you about 10-15% increase in gas.

Good luck on what you decide to do with your subie!