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Rotax 787/800... Water in crankcase. HELP!

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Wicked46

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The engine in my 97 GTX melted a piston and I'm in the process of fixing it. I bought a used rotax 787 from a guy and before I drop it in I need a few questions answered:

I removed the top cyl. cover and turned the motor by hand while it was tilted on its side. Milky water started to run out from the crankcase and cyl walls which tells me it may have been sunk.
The owner assured me that the engine ran fine before removing it and the compression was 150 in both cyl.

-What can I do to check this motor out before I spend all my time installing it?
-Should I remove the oil injection?
 
you need to flush out that crap somehow...fill up cylinders with gas,...etc, then if o-rings ok, put back together and install it. Wont no, if compression is good, or motor running til you try...
 
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