Land Rover Repair: Overheating-2000 Discovery, radiator cap, dip stick

Question
I am considering buying a 2000 Discovery 54k. I have no info on its pasted history. It has an overheating problem. If the water level is down the slightest bit it overheats. I do not see any water leaking out, but you have to add water every 50 miles or so. I replaced the radiator cap, which slowed the process down. It was suggested to replace the thermostat, but I do not see how that would account for the water loss or why a little loss of water would cause it to rapidly overheat.

I am also concerned that the overheating has caused damage to the engine.  It does have what sounds like a valve ticking. It has got so hot at times the valve cover gaskets appear to melt. I do not see any evidence of water on the dip stick. When it is not running hot, it general runs well and is in good condition.
  
Your thoughts and suggests would be greatly appreciated?

Answer
It sounds like the motor may have internal damage.  I have an article on this in the rover news, which i think you can find online at www.roversnorth.com - search for robison on rovers.

read about dropped liners and overheating (2 articles)

Repair can be quite a lot of money - 6-7-8,000.  Keep that possibility/probability in mind when considering price.