Re: water in oil
I too have water in oil. But mine came directly after i did an entire rebuild of 2 engines. One with no issues, one with water in oil.
My engines are a bit different then yours being Merc 470's, but same concept.
What it came down to with me is a bad block, looked kind of like the steel cyliners for pistons eroded at the bottom and water must have gotten in. Probably at some point in the engines life, it was either overheated really badly or froze in the winter, since the steel cylinder walls did not look completely flush onto the aluminum block.
All the manifolds seemed ok, and i pressure tested the head... So eventually came to the conclusion its the block.
Please let us know how it worked out for you, hope its not that bad!!