Yes, the item you have circled is the oil cooler, and your engine is the D360 instead of the D358. It is fairly common for those oil coolers to fail and leak coolant into the oil. The good news is, the D360 is less likely to cavitate than the D358, bur it is still possible just not as likely. I would start with the oil cooler, and work from there. It is fairly easy to remove and you should be able to pressure test it without too much work. I would not be scared to rebuild that engine in any home garage, just don't roll the parts around in kitty litter or anything. I have rebuilt numerous tractor and vehicles engine right in my garage and have never had a problem with any of them. Just keep them clean and take precautions not to scar any parts when reassembling.
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