You have a blow by issue. Either your crankcase is not venting or your piston rings are shot

Thank you! Not sure why someone set it all up this way, very foreign to me. I am going to head down to the boat and take some more pics and do some investigating, try to get those covers pulled.

Just got down to boat. I have elected not to pull valve covers as I'd rather just call a professional, which I am not. So I hear this red ignition is also for cars?? Heres some pics I took of engine.

"technically" yes its automotive but people do use them on boats...the "marine" versions are blue and they are potted to better resist vibrations and i believe they have sealed connections to resist corrosion....the boxes seem to last longer when they are not mounted on the engine but on the back wall of the boat. I see your flame arrestor has the hose connections there all ready...wonder why the previous owner went the catch can route? Have you started the engine with no hoses attached to the valve covers? maybe the catch can is just messed up/dirty inside and causing issues.....

Also may want to pull that flame arrestor off and see if thats a marine carb or not...

Should I get some plugs for those valve covers before testing it?? Also I believe the carb is wrong as well. It idles way too low in gear and I have to give it a finite amount of throttle around the docks to keep the idle at 650 or it falls to around 500 and idles out.

Normally I would agree but both of my 540s pushed a lot of oil out the valve covers and they were healthy. Did so from day one. I rigged the same device as the OP has but had to drain the can every few hours.

No, do not plug the valve cover holes.
Turn the idle up a tad (screw on the throttle lever on the carb)

No just start it up with no plugs and see if it starts puking oil again...maybe have a rag handy in case it starts getting messy and shut down right away if it does. You may get a little bit of splashing/splatter from the rockers working when running but it shouldn't be puking its guts out!
Idle rpm's can be adjusted...thats not a big deal. if the engine runs good otherwise through the power-band i wouldn't worry about it...only thing about not having a marine carb is the "J" tubes which if not there you can actually remedy with some rubber tubing...but the shaft seals also have the potential to leak fuel past them...again not a big deal on a car with lots of fresh air but on a boat, the fumes can potentially collect in the bilge and possibly go boom!

Ya know...just look at th epics of that catch can again....Im also wondering if the lines going from your valve covers to the catch can are too small and restrictive...mine are like a 5/8 ID hose i wanna say...if those are like a 3/8 fuel line then maybe there is not enough room for the oil that collecting to drain out and back down the line as what ever blow-by is trying to run out the filter....then the catch can is doing its job of collecting the oil but its filling up too fast and then you get the puking of the oil.......