post a bigger picture of the breather - the breather metal pipe is usually welded with a coolant pipe to ensure that the fumes remain hot when they enter the airbox, it is done to prevent the fumes from condensing to oil.
I think that pipe is corroded and leaking (due to the use of straight water and no coolant), causing water to mix with the fumes - you also will have water going into the crankcase and mixing with oil and it also caused your overheat as its quite a high point in the cooling system, Also if you have removed that piece of twin metal pipes with nothing but a rubber pipe, please kick yourself now,
What is the overall condition of the cooling system internals - is it rusty? never maintained? - if yes then this was inevitable.