I remember on a few stock merc "black" engines, that simply had water thermostats, low oil temps were pretty common. At least on the engines I've seen around here boating in cold lake michigan water. My buddy had some 365 mags, bone stock, oil temps rarely ever went over 150-160*. He ran that boat like he stole it, full throttle everywhere, 38'fter. He sold it with over 900 hours on the engines, and they still ran great, and held 30+lbs of hot oil pressure after a hard run.

I think back then, mercury spec'd oil cooler size to the engine package and it generally worked. They did not however, have control over the temperature of the water that would be passing thru the oil cooler. Big difference when you're pumping 55 degree water thru the oil cooler, or 90 degree water thru the oil cooler. Bottom line, they were pretty long lasting engines. Actually, longer lasting than most of the modern marine engines today!

Sorry it took so long to update this but been busy. Well its fixed,cant belive it but the problem was a leaking intake gasket. Pulled it apart and changed the gasket and, no more milk, got some temp in the water and the oil. Boat is running great so far. Still have not run it wide open for any length of time but did push it for a quick run. Saw 91 at 5800 for a few seconds, still have to dial in the jetting and timming also the prop but so far im pretty happy.