It definitely looks like mayonnaise from oil and water mixing as above but if the previous owner was not fussy about draining down after use it could be a year's worth and will not be bad news. Just use a separator in your air supply and don't use the line for painting till you are sure of the cause.

it coats the inside and stops it going rusty that would depend on the capacity of the tank and the cfm of the pump .along with any wear of the piston rings and valvesSorry to dig up an old thread,but i also had this in mine aswell,also takes a fair bit of time to build up pressure,dont know if its related.
the only acurate way to test for wear would be to use a compression tester on the pump


