Following my previous post, I spent a little while doing further research, and meditating.
My conclusion is that the water in the oil is most likely due to ingress through filler/dipstick tube during the pressure hose down after gunking the engine clean. A theory backed up by the total absence of water related gunge anywhere! Relief.
The combination of a little knowledge, new guages and general pressure to perform had me in a spin. Without those 3 factors, I would have been blissfully unaware. Far better to be safe than sorry.
As for the oil pressure. Well, I was happier with a max and min of 40 and 20 rather than half that, but it still sounds and runs sweet. It's a possibility there is a fault with the guage as there is about a mile of coiled up capillary tube and it isnt fixed very securely. I'm less worried than I was but will still monitor closely, without stressing, and will change the oil for Morris s straight 30 when I get home....meaning of life? Don't worry, be happy!

My bus number (if any): 1842