Low water temp causes condensation. Low oil temp reduces the ability of the engine to rid any moisture acquired.

I had the same problem on my 496's in my 311 ....used the KE remote thermostats and 3" merc oil coolers .....motors had 140* water stats and the 212* oil stat ....if you ran the boat hard it would work ok but just cruising around the oil would not get up to temp ....I bypassed the water around the oil cooler with a ball valve so I could restrict/slow down the water thru the oil cooler .... works ....could cruise @ 3K and get oil temps over the magic 212* and all condensation went away .....m

Weird part is my old engine didn't have any condensation issues at all, but I didn't have a 3" oil cooler either.

It's just a frustrating issue. My water temperature never gets over 170 and oil psi stays at 50 at idle.

Anybody have any more input?