I got a free S4 13b from a friend and when I took it apart a few days ago I noticed some strange whiteish waxy substance in the water jacket. I've never seen anything like this before and was wondering if it could be stop leak or something like it. Is this a bad indicator for a rebuild or should I see how it looks after cleaning it up?

 

That is likely an excess of petroleum jelly that was used during assembly. I myself opened a Mazda reman from the mid 1990’s that was absolutely loaded with that stuff—to the point where several of the coolant passages were completely occluded. Several others on the forum have also observed this going back 20 years or so.

I would clean it out, see how everything looks and go from there.