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The heat exchanger is a water-cooled aftercooler. It is used to remove the heat of compression from the discharged air, allowing the water to condense out of it. It is the first stage of drying the air, but they are expensive to operate if you are just dumping water through it and out the drain. They are most useful in a contsant run, high air demand type of operation, where lots of heat is being generated. I am not sure what you mean by breather. If you are referring to the air filter, then you likely have an unloader issue, as the air being dumped by the unloader is often sent back into the head just behind the air filter. What I would do,is make absolutely sure that there is oil pressure, then, if there is, remove the unloader signal line which goes from the hydralic unloader valve to the head unloader towers. If there is air coming out while the compressor is running with proper oil pressure, the hydraulic unloader valve is faulty. It could be that it needs the seals replaced, since if they fail, it will not actuate properly, and there is a distinct possibility that the air signal is leaking into the crankcase, which would explain why there is oil and air coming out of the crankcase breather tube. Hopefully, all the air lines are hooked up correctly to the various controls, as it will be difficult to explain their proper routing to you. Ensure that there are no stuck rings. Ensure that the oil level isn't too high. Make sure that the unloader plungers are not seized down inside the unloader towers due to corrosion of the aluminum body of the unloaders. Take off the hexagonal covers, remove the rubber diaphragms, remove the metal puck inside and physically push down on the top of the plungers. They should go down relatively easily (the springs are a bit strong, but manageable) and they should come back up quickly, with no dragging or hesitation. Make sure that the 1/4"NPT openings on the side of the unloader towers are not obstructed, since that is where it vents the air it is trying to unload. If these ports are blocked, or if tubes attached to them are blocked, you will have unpredictable unloading. It is possible that the valve discs are cracked, but I'd exhaust every avenue of investgation regarding the unloaders before opening up the heads. There is the possiblity that there is also some debris on a valve seat holding open a valve (carbon from an intercooler is often the culprit here). The braided stainless hose is often available from a hydraulic supply shop. If the ends are screwed on, it's possible to salvage the fittings and make your own, if you can buy the line in bulk. It's good stuff, but expensive. The fittings are removable, like the kind you see on one-wire braided hydraulic hose, except there is no left handed thread, if I remember correctly.
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