I noticed this discoloration and fluid

 

Condition of your motor oil?

 

My experience with incorrect fluid in the AW4 is that once it develops problems, correcting the fluid will not fix it.
Try driving it in '3'
Does it act the same?

 

Yikes. That doesn't bode well. I'd also suspect a head gasket then. How's a compression test look? Leakdown?

 

Edit: already answered.

 

I'm gonna do the white smoke test and coolant bubbling test and see if it passes or fails, but I'm going to buy a coolant test kit and my oil doesn't have any coolant as far as I can tell

 

So if the radiator cap is off and I start the car will there immeadietly be bubbles I can see or does the car have to warm up firstif I see bubbles then that's another sign of a blown head gasket.

 

How immediately? If there's air in the system the water pump will push it around. Combustion gasses I'd imagine take a couple of seconds to get up there.

 

A few minutes after there's still bubbles coming out of the cap I'm not going to leave it on longer than that, because I'm not going to take the risk of damaging it more. I'm going to have it checked out at a mechanic to be sure. Also if I were to change the head gasket, what else would be worth changing while I've got the while thing torn apart?

 

A camshaft upgrade comes to mind, although I don't know if it's particularly useful if you don't have any other mods.

 

I'm going to buy a Haynes manual for this job if I end up doing it. When I replace the head gasket, what bolts and parts should I replace, and not reuse old ones. Also if I could get any links to any write ups or pages that would be much appreciated.

 

If they're original, all the head bolts, lifters, valve springs and seals, rest depends on your budget. Haynes manual is a good call, they go over some ways to determine what else you should replace like pushrods and rockers.

While the head's off might as well send it a machine shop to get checked out.