Also an exhaust manifold stud broke in half when putting that back together creating a small exhaust leak. Only about 1/2" of the stud is left there. Trying to figure out the best way to remove it, but it might have to be drilled out.
Is any of it still sticking out?
My friend and I are thinking perhaps a smaller than original bolt size Heli-coil might be an option to avoid drilling out the holes too large to do anything else with.
You're already too big for the next smaller STI insert. Some of the other "chunky" inserts might do it, but then you're gonna be drilling bigger than for the correct size heli-coil,
This way if it the Heli-coil doesn't work out I can still drill out the holes for M8
You can get a plausible M8 thread out of an M6 heli-coil "hole". It'll be a little shy of ideal but not much, but you're not even in a pressurized cooling system here. It'll be plenty. But you won't need it. The M6 kit will make a thread that's as strong as the bolts.
or possibly M7x0.75 if I can find it.
In a corrosive environment, the coarser the threads, the better. Those fine little peaks on a fine thread dissapear quick.
In my case I will have to purchase the entire kit as Heli-coils are new to me. Where I am worried about leakage is between the block where the thermostat housing extrusion bolts onto it. Will the surface be flush after installing the Heli-coil?
Yes, they will be flush or below. Heli-coils are dirt simple. You're setting the thing, you can set it as high or as deep as you want. Thee inserts are typically turned in 1/4 to one thread below flush. If you have need, you can leave them closer to flush. Deeper makes it easy to start bolts by hand. In this case, I doubt that's difficult, so it probably doesn't matter. If you need arbitrarily long thread engagement, you can stack as many inserts in a hole as you want, one after the other. If you want half an insert, or one and a half inserts, you just cut the coils off with (stout) cutting pliers. There's a trick to that, ask first if you need to shorten one, but you don't need it... One "standard" length insert is gonna hold back an M6 bolt easily.
I just looked quick, "HeliCoil" and "Save-A-Thread" are the two common brands around here. Either kit can be had for about 30 bucks. That's the drill, the tap, the installation tool, and directions. That is DIRT CHEAP compared to a couple of iterations of improvized fixes, trying to find a less expensive solution. Cost isn't in your way on this one.