It sounds like the head gasket went, pressurized the cooling system and shot the coolant into the overflow.
The reason it was pegged hot was because the sensor was reading steam and not liquid... it probably didn't overheat.

And a 3.4 swap would be awesome!

89 4Runner
3" BL, M/T locks, 33"bfg mt, bilstein, Kayline, tubebumper, toyotafiberglass panels
TBI: Elocker,3.4 w/ORS,b+b,S2Sstg2cams,arias pistons,P+P intake,TRDs/c,URDpullies+7th,downey headers,MAPECU2,WEGO WB, SupraMAF,walboro255,stg4clutch, EPaOo2 sim