> Am I right in thinking that it is an oil seperator, if not what is it?

Yes. That's the oil separator for the crankcase breather. It's there so oil droplets get caught and flow back into the crankcase instead of being carried into the intake.

> Secondly, how on earth is water getting mixed with oil and blocking up the pipe leading from it when there's no water in the engine oil?

Do you mean a whitish sludge that builds up in here?

This is usually caused by condensation if the car is driven for short distances only and never really gets up to operating temperature properly. The inside of the filler cap is probably coated with the stuff too and the dipstick is probably showing signs of rust..

Water is of course always present in the air and the combustion process also produces water. Some blow-by from the cylinders is always present and allow some gasses to get into the crankcase (also the reason for the breather in the first place) This water vapour will condense inside a cold engine and the related hoses.

Another way water can get into the oil is when you have a head gasget that's broken, but in that case the oil usually turns to a kind of 'milkshake' pretty quickly.

Bye, Arno.