I have a nice 1999 300 4x4. I just found just a bit of milky water residue on the dipstick. The oil came out brown when I changed it.
I mean, this is an AIR COOLED engine so I don't think it can be coming from a headgasket. I don't know of anyother way water could get in besides condensation. I've seen Chevy trucks with coffee looking PCV & breathers in this high humidity area... could this be anything else?

 

Could be several things. Do you ride in the water a lot and could there be some way water is getting in from the outside?

One of the products of efficient combustion is water! Check all your breather lines, especially the crankcase. Check the breather where it comes up into the airbox.

Are you ever starting it up, but not giving it enough time to get really hot. When it gets hot, that will drive the water off, but if it doesn't get hot that moisture will remain in the engine.

 

The Honda hasn't left the yard in a year... due to my disability, I've been using it to get to / from the barn. Certainly not high water! But it doesn't get warmed up for long so that's the likely cause. Unless someone else comes up with something...

 

If you aren't riding in water, that is likely the cause. Short runs on motors, especially in colder weather, will cause a surprising amount of water to build up.

My Harley will build up water in the breather hoses during the fall and winter when I only ride maybe a mile to work, and back... and I remember seeing a recall on another brand of bike- that water from condensation built up in the crankcase vent system could freeze in cold weather and block venting- which could result in a hose popping off and dumping oil, or something like that.

Anyhow, I'd suggest either riding the machine a half hour or more after it is warmed up a couple times a month, or change the oil much more frequently.