I have a merc 305. I ordered a new engine from U.S. engine (came with crank, pistons, timing chain, heads) already installed. Broke a connecting rod on my old 305 last year (was an automotive engine when I bought it). New one is marine. Put on all my accessories from the old engine including the intake manifold. Got it timed and it ran great. really great. Checked the oil after 45 min and it had water in it. I changed the oil and took the intake off and got it machined. Ran a compression test that showed 100psi consistantly. Little low but i figured since the rings havent got broke in yet this is prob normal. Put the intake back on ran great again but still same problem. took the exhaust risers off and looked down in one side and there was water in it. not a lot but some along with some rust evidence there had been more water in there. I know the most common causes of water in the oil are cracked block/heads, bad head gasket.. Its not a problem of freezing. its a new install this spring. new engine not a rebuild. My question is how much water would it take to get from the exhaust manifold into the engine. I'm thinking bad riser gasket (it wasn't metal). I turn riser upside down an put water in the water passage and it didn't leak, same with maniford (however they were cold). I could still have a problem with the intake as well? Maybe a crack that the machine shop didn't catch? sorry so long just wanted to provide all the info. Also after i installed the intake after getting it machined, watched the dipstick. oil looked the same after 30 min but didn't move up on the dipstick.