Small Engine Troubleshooting Problems? Ask a Mechanic Now.
Bad news. It is likely a cracked block. It is very important if running non antifreeze coolant previous to freezing temperatures that the plugs on the block be removed. The lower radiator hose will ONLY drain that part of the engine that sits above the approximate centerline of the water pump. This leaves the entire water jacket of the engine full of water. You can diagnose by removing the oil pan and again adding water to the system to see exactly where it is coming from, it MAY be repairable. If it is not into the cylinder bore and you can access the entire crack careful cleaning and application of epoxy CAN fix this. It likely be necessary to completely dissasemble the engine in order to get good access to the crack to clean and apply the epoxy. Generally the amount of water your describing is a cracked block. Heads and head gaskets tend to be MUCH slower leaks, and often only leak under pressure.
Why do you not run an antifreeze/coolant? These systems don't hold much and the cooling performance is boosted by the antifreeze.