I just replaced the thermostat and the engine is not running any hotter than with the old thermostat. My IR temperature gun still reads 81C on the back of the water pump. The new Toyota stat was rated at 76.5C, same as the old one.

"milky" isn't strong enough to describe the emulsion of water in the oil that I just drained for the second time in a week. This oil has only been in for about two hours engine run time.

I have a Dwyer magnehelic gauge that reads inches of water column and I measured crankcase vacuum and it read 1/2 in water column vacuum which indicates PCV is working properly. A visual inspection of the PCV valve shows nothing out of the ordinary.

Sure the engine does not run for very long each time it is started but we have had the forklift for over a year and we used it the exact same way last year and did not have this water in the oil.

I am going to sample the oil again and get it tested. Perhaps the lab missed glycol last time.