That is the water jacket.
The heads will also leak at the front and rear corners where they join the block. I think this because the blocks relax over time and get a warp.
I had my block in Saudi line bored and machined flat many years ago and my 91 used to leak there with OEM Ehlring composite gaskets both with shaved 3.9 heads and with new 4.6 heads.
You should inspect all of the cam lobes while the heads are off. Any with discolouration or bits off the sides near the tips mean a new cam and lifters.
I found that with recent (6years ago) end gaskets that I had to trim a bit off each end so that they fitted properly. I put sealant around the water passages also.
Personally I think the composite valley gaskets are good although early ones used to delaminate and the rubber stuff fall into the valley. I have seen this at Graeme Cooper.
Regards Philip A

