I cut open the standard Merc filter on my boat to look for any issues as I've heard that a little reversion can fubar a filter. Does this look as it should?

You will need to post a cross section view with the media removed from the steel filter housing. So you are currently having reversion is what you are saying? Yes, moisture can damage a filter, however bearings, valves and such would concerm me much more. Also, there are many filters that perform many times better vs the brand you are using.

I noticed a little drop in oil pressure and read that when the pleates stick together rom moisture it can cause a drop in pressure. Less than 20 hours on a new Eagle 502. Never ran it hard yet.

I can get better pics tomorrow.

The oil itself looks and smells like it just came out of the bottle.

That's why I made my own housing for these. The hp6 on the dyno started to do that.
[ATTACH=CONFIG]538219[/ATTACH][ATTACH=CONFIG]538220[/ATTACH]

That is a very cheap filter. What kind of oil are you using? It looks cheap also.

Brad Penn oil. The filter was put on by a mechanic that I'm no longer using.

It reminds me of the old group one poor non detergent motor oils that would sludge up and varnish up the complete internals of the engine. I would like to know also what motor oil you are you using ? I would drain your motor oil from the bottom of the oil pan to see what in the world that looks like.

Also open up the pleats of your oil filter and run a magnet thru them to see what it picks uo. I understand not all internal engine pats are magnetized but you would be surprised what the magnet might pick up if you have accelerated a lot of internal engine wear. Also after you completely drain your motor oil - I would run your magnet thru that as well.

I say this because your pic of the cut open oil filter looks like possible metal trapped (slight metallic color) as well but it could be the pic to. Also besides the oil you are running as to what is it - it looks like you have some water intrusion and or heavy condensation built up and fuel dilution. Also would wonder what are your engine and oil temps running at ? Possible a very cold & rich running engine.

I know you said standard merc oil filter but was it a fram oil filter - I see orange in the pic

What was used to cut the filter open ?

Will do. There's kitty litter on it and I cut it open with a metal sawzall blade.

180* water temp

Brad Penn oil