borrowed from http://thedieselstop.com

Coolant System Maintenance

    Cooling system maintneance is a very simple but necessary item to
    do to keep the engine running later in life. Diesels, particularly
    the Powerstroke, are prone to a problem called cavitation. This is
    where the vibration in the engine causes the linings in the cooling
    system to eat themselves away and causing block failure. To prevent
    this, a sacrificial chemical called SCA4 needs to be added to the
    system periodically using special test strips. SCA4 and the strips
    can be purchased at major diesel stores such as your local
    International dealer, Ford Dealer (Additive known as FW-16), or
    through Diesel Injection Service over the Internet.

    Ultra short version courtesy of Steve Pepin:

    1) Open the fill cap and drain the system through the petcock.
    2) Refill with fresh water to the capacity of the system.
    3) Turn on the heater and run the engine until normal operating temperature is reached.
    4) Turn off the engine.
    5) Repeat steps 1 through 4 until all the water comes out clear.
    6) Drain the system through the petcock. There will probably be water in the reservoir -- don't worry.
    7) Calculate the correct amount of coolant for the proper mixture and pour it in.
    8) Fill the rest of the way with clear water.
    9) Run the engine to normal operating temperature and top off the system with water.
    10) Add the correct level of additive.
    11) Enjoy the rest of your day.


    The correct level of additive is around 2.0-3.0. Any more is a waste.

    Offical Ford Motor Company way of changing the Coolant courtesy of Stephen:

     

    DRAINING,FILLING AND BLEEDING COOLING SYSTEM DIESEL 7.3L ONLY

    About 80% of the coolant system capacity can be recovered with engine in the truck.
    Note: THIS IS FROM A WORKSHOP MANUAL


    1. Release the pressure in the cooling system by slowly turning the
    pressure relief cap one half turn.  When pressure is released,
    remove the relief cap.

    2. Place a suitable container below the radiator draincock.   If
    equipped, disconnect the coolant hose at the fluid cooler.

    3. NOTE: Do not remove draincock until cooling system is completely drained.

    Open the radiator draincock  and remove the cylinder drain plug (if
    equipped) to drain the coolant from the cylinder block.

    FILLING

    1. Follow the drainning procedure in reverse order

    2. Add the proper engine coolant mixture to the degas bottle (the
    clear bottle on top blk cover)

    3. Move the temp blend selector to the full warm position (middle
    of blue and red dial) Editor's note: Set the A/C Temperature
    controls to a vertical position

    4. Run the engine until it reaches operating temp at 2000rpm for 5 min.

    5. Turn off the engine and allow the cooling system to cool

    6. Add the proper engine coolant mixture to the degas bottle until
    the coolant is between the "COOLANT FILL LEVEL" marks.

    7. Repeat steps 1 - 5 until the degas bottle level is OK.

    BLEEDING

    1. Select max heater temp and blower motor speed setting. Position
    the vent selection control to discharge air through the  A/C vents
    in the instrument panel.

    2. Start the engine and allow to idle. While the engine is idling,
    feel for hot air at A/C vents.

    3. CAUTION IF THE AIR DISCHARAGE REMAINS COOL AND THE ENGINE
    COOLANT TEMP GAUGE DOES NOT MOVE,THE ENGINE COOLANT LEVEL IS LOW IN
    THE ENGINE AND MUST BE FILLED. STOP THE ENGINE, ALLOW TO COOL AND
    FILL THE COOLING SYSTEM AS DESCRIBED.

    Start the engine and allow to idle until normal operating temp is
    reached. Hot air should discharge from the A/C vents. The engine
    coolant temp gauge should maintain a stabilized reading in the
    middle of the NORMAL range and the upper radiator hose should feel
    hot to the touch

    4. Shut the engine off and allow it to cool

    5. Check the engine for coolant leaks.

    6. Check the engine coolant level in the degas bottle and fill as necessary

    FLUSHING ENGINE AND RADIATOR

    1. Never open a hot cap that is under pressure. once the pressure
    is released,remove the pressure relief cap. Drain the cooling
    system per cooling system draining, filling and bleeding section

    2. Remove the water thermostat

    3. install the water hose connection without the water thermostat.

    4. Use cooling system flush-all, flush kit hardware pkg. and drain kit. 
       Editor's Note: This a FoMoCo kit used in shops...

    5. Install the water thermostat

    6. Backflush the heater core if necessary

    7. Fill the cooling system

    BACKFLUSHING-HEATER CORE

    1. Never open or remove relief cap while hot or under pressure

    2. Partially drain the cooling system

    3. NOTE refer to the cooling system flush-all operating inst.

    4. Fill the cooling system

    Strangely enough, adding the coolant additive is not on the list.
    Add it last to the proper 2.0 - 3.0 level.