Re: 1997 Mercury 150 EFI
You need a new shop.
Fuel is pumped to the vapor separator tank, VST. There it is mixed with oil from the oil pump, sent then to the injectors. So there better be fuel/oil mix in the VST.
The oil resevoir is kept full at all times via a pressurized system that gets oil from the remote tank and sends it to the on engine tank. If the engine was recently run yes oil will overflow when the cap is taken off. There should be no air in the oil tank.
Whether you take out the oil system is up to you. You can pre-mix your gas and oil. You will burn more oil and have some additional smoke, but it will be in there. If you decide this then you will need a special Mercury block off plate with a couple of O rings, Under $10 at most dealers. You will need to remove all the oil components and block the pulse fitting.
post back if you want to go this route.
If the oil system is running fine and the oil warning module is OK then you may want to leave things as is.