No idea how these damn rotary engines work but there shouldn't be water in the oil, I know that much. The coolant isn't low and never has been nor had to be topped off. Car is an 04 with 90K but the engine was replaced by Mazda 9 months ago due to a recall or something. I checked the oil today and it was a little low and milky looking. Just like a blown head gasket, etc. Oil has water in it no question, but how/where? Again the coolant is NOT low and never has been since the new engine was put in the car.