Ford 5000 PTO overheating

I have a pre-1968 Ford 5000 Diesel that recently started emitting steam? from under seat around fill cap while bush-hogging in thick grass. Other factors include the fact that fluid is milky-tan in color (water intrusion?) and the PTO keeps spinning when disengaged. Do Y'all think this is failure of the hydraulic pump or what?

Milky oil does indicate water, so what you were seeing likely was steam, once the oil got hot enough to start boiling it out. The pto not stopping is either a worn or failed pto brake, or wawarped pto clutch disks. If it's the brake, a load on the pto will stop it when it's shut off. If the clutch disks are warped, it will still turn under power when shut off.

Yep, I think I understand about the PTO brake and clutch plates causing the shaft to spin while PTO control lever is disengaged. I can access them by removing right step plate?
Is not the overheating of the fluid a separate issue? Make sense what you say about the water in the oil steaming when hot. But what is making it get so hot? I did recently change fluids with what Ford mechanic recommended.
Another question is how the water is getting into the rear end in the first place. (The tractor does stay outdoors).

With water mixed in the oil as the oil heats up water turns to steam.
First thing I'd try is putting in fresh oil to eliminate the water.

If the pump where weak or bad the pto would be slipping or not even working under load, the fact that your brush hogging in heavy grass tells me the pump is working ok.
Sounds like the brake is worn out and needs replaced.

I recently did repairs on the pto of my 67 Ford 5000 that wouldn't stay in gear and also wouldn't stop turning.
We removed the lift top, disassembled the control valve and linkage along with removing the upper shaft to check the support and sealing rings. We found the support had deep wear grooves from the sealing rings so we replaced it. The brake was completely worn out requiring a new one, the detent holes in the shift arm were badly worn so we welded it up and reshaped the holes. Also from years of use the small roll pins that hold the outside lever and internal shift arm together were slightly bent causing the lever stop to be out of time with the detent preventing the detent from holding the pto in gear.

You'll need some type of hoist or engine crane to get the lift top off and back on, the rest is fairly easy.

John

The water gets in through gear lever boots or lack of them. After the tractor has been standing, crack open the Trans and back end drain plugs about 3 or 4 turns and you will find the water will drip out. Watch till it changes to oil then re tighten the plugs.

Water gets in through the vent. All gear cases/housings are vented to protect seals from blowing out as case warms up. Whenever you have a humid warm front come through and you have condensation on the outside of the case, guess what? It rains inside the housing. Normal frequent use drives the moisture right out. Without frequent use it accumulates.