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2nd Gen Ram Tech1994-2001 Rams: This section is for TECHNICAL discussions only, that involve the 1994 through 2001 Rams. For any non-tech discussions, please direct your attention to the "General discussion/NON-tech" sub sections.
WTH? Definitely replace and then flush. Better disconnect the heater hoses and flush the heater core. Also remove the thermostat and use the heater hoses to flush the block. Replace with new thermostat.
This is a prime example why I tell people to flush the cooling system every three years. A little preventative maintenance goes a long way. That fluid also looks like dissimilar coolants were mixed, thereby forming the mud.