Thank you heaps guys :)
luckily the head gasket was fine
Yes I will look for and get that Haynes manual.
My questions are underlined
I managed to change the water pump and the thermostat. It was the waterpump that had given up, as I could see water trail and rust stain under the waterpump, where there is a hole. I am not sure what that hole is for, but someone told me it was there to kind of let us know that the water pump needs to be replaced.
The thermostat was very rusty, it was stuck, I had to use a screw driver to lift it up.
After I took the radiator and everything out, it became obvious that the water pump was leaking for a while, as there were lot of rusty stain around the place below the water pump. As I only bought the car a few weeks ago, i must agree i did not check it properly :)
The bypass hose was OK so I did not change that.
Only issue now is, after I have fitted everything back, the car is miss firing when I accelerate to more than 50 mph, I am not sure why. I will start troubleshooting, thinking of starting from the condensor --> ignition coil --> spark plugs. Does not miss fire on idle or when driving at speed lower then 50 mph.
could it be that i while i was cleaning, water has gone into some place that it shouldnt have? I was very careful though to ensure that water stayed away from ignition coil, distributor etc.
But your advise will be highly appreciated as I am not sure of where to start.
Once again thank you heaps everyone for your help and guidance as this was the most extensive mechanical work that I have ever done. Feels great :)
You guys rock 
For anyone else who may ever need to do this here is how it went for me:
taking all old stuff out: 1hr
cleaning all the rust (radiator, engine block, hoses, thermostat seat, and the area around there, e.g chassy etc) = 3hrs
putting new parts and all other stuff back: 1.5hrs
now came the flushing part, since I flushed it 5 -7 times before i put the antifreeze back in (used radiator flush once though): 2.5hrs
Thank you.