Re: water in oil
Not sure if this is your problem, but I'll tell you what fixed my chocolate milky oil.
I had a Kohler Marine Generator that kept breaking valve springs. I had to change them every season. There was always water present in the valve spring area. I rebuilt the motor, thinking that it would fix all my problems, but there was still water present. After troubleshooting, I finally noticed that the thermostat was stuck open. The engine was running cool (too cool). The difference between the internal and external temp was causing massive condensation. This was not just a little bit. After 5 hours of running, the dipstick showed about 1/4 quart more in the crankcase and it looked like chocolate milk. After changing the thermostat (I even went with a little hotter one), the problem disappeared.
As a side-note, when I had the problem, I was using Amsoil. I never noticed any oil in the crankcase. I later found out that the presence of water in oil is less obvious when using synthetic oil. This is why I never noticed the water in the oil. After the rebuild, I started using the mfg recommended petroleum based oil, which is how I discovered the water (it was more apparent with the petroleum based oil). After changing the thermostat, I ran for an entire season and the oil looked like the day I put it in. It was perfect. It has been over 3 years since I changed the thermostat and I have not had a trace of water.
I'm not saying that amsoil caused the problem, but it was less obvious with amsoil than with petroleum oil.
I found the answer to my problem when reading an article about the need for marine engines to come to temperature. Short runs cause condensation and without the motor reaching temp, it does not have a chance to burn off any moisture.
Hope this helps.