I would pull the filter and dump it in a jar. I bet it has water in it.

We had a pair of manifolds that reverted and the oil in the heads looked just like yours. Best of luck.

that will drain to the pan eventually and all of it will become that color, you might have a small leak in the oil cooler ?

That’s not condensation. You have reversion or a leak.

If you have the bow of your boat pointed down the driveway sometimes that angle can cause reversion. It wouldn’t be the first time that’s happened here.

Thanks for the replies everybody. When I had the block at the machine I did not give them the manifolds to pressure check, I just visually inspected for rust trails so that is a possibility. I pulled all plugs last night though and none were wet. I also this morning went back through my gasket set and read through the instructions again, I did not put any thread sealant on the timing cover bolts or water pump bolts and my instructions are saying some of them should have it?

The cam in the motor is also not stock. I dont have the specs off the top of my head but when I get back to my shop I can get the specs. I believe it is the 383 ramjet cam.

shouldn't that engine make more than 30psi oil?
What is the spec?

The 350 in my power play makes 40 psi all day long. I believe spec is a minimum of 4 psi at idle and 30-60 psi 2000 rpm and more. I have read s rule of thumb of 10 psi per 100 rpm

Edit:
Oil pressure on this motor is definitely an issue that I'm working on addressing.

Here are the cam specs