Isn't this a thing of beauty. Thats RUST. Cleaned it up, new roter & cap. Runs much better. I wonder why. I tried to seal it with RTV with no success. It's not that humid here in NY. I can not understand why this keeps happeniing

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It appears that the moisture in the crankcase is being vented out through the distributor past the shaft and collects in the top due to the cap fitting tightly. I would recommend checking the PCV valve to make sure it is clean and free and going to the intake plenum and if you have carbs then make sure that the case and heads are vented to a large vent box and that the foam in it is clean and allows the crankcase to breath.

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I have carbs with this vent box. Vents from the crank case and cylinder heads. Has no filter just a small amount of oil in bottom of box.

The box is supposed to be mounted higher (so the oil can drain back) and open to the environment.
The top should not seal, it's supposed to have a lip on the underside that prevents it from sealing the box when screwed down.
The box also should have a sponge inside to trap the oil vapors so they can condense back into oil and accumulate at the bottom, then drain back.

Make sure that box has not been sealed ...
Andy

Here's a pic of my breather box when i still had the 2056 ...




Andy

Fascinating

Hey, those carbs look familiar!

To add, mount the box like Andy's was.

Question. What does that oil that you drain back, look like? Is it yellowish?

Only if you have a lot of moisture in it. Otherwise, it should look like any other motor oil ...

Andy

Mounting the vent box higher is not a requirement. If you don't and if you have a lot of oil vapor collecting in the box, you can find that it will fill up the box. So if it's lower, just keep an eye on it.

Also, if you do mount the box higher you should think about removing the valve from the PCV system. The valve will keep oil from draining back to the crankcase anyway, and if you fill that line with oil, it could keep the valve from opening and then you have NO crankcase ventilation which IS bad.