I've seen this on every air-cooled car I've owned. You only get 
"excessive" water if you never let the engine warm up fully - drive a 
mile and shut it down kind of thing. The water comes from piston ring 
blowby and is one really good reason to change oil regularly - the water 
and other blowby gases form acids that will eat your engine in time.

I had a 36 HP motor that had been sitting with the old oil in it for a 
few years before I got it - the bottom of the crankcase was deeply 
pitted from that acid. This was with the older magnesium alloy - newer 
aluminum cases are not as sensitive.

Change your oil and take the car out for a couple hours every month or 
so - the buildup will be less, but you will always see some foaming on 
the oil cap. Nature of the beast.

Chuck Kuecker

Damon & Gay wrote:
> Hi Everyone,
>
> I was wondering if anybody has had an excessive amount of moisture in their 
> oil in the crankcase showing up on the oilcap. I assume there is water or 
> moisture in the oil because of the yellow sludge on the oilcap.
>
> Thanks,
> Damon
>   

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