Mystery liquid in the ignition timing housing

I opened up the ignition timing cover to find this mystery brown liquid at the bottom of the housing. It didn't look like oil but more like rusty water. The rest of the housing some white crusty deposits all over, kinda like calcium deposits or like the stuff old batteries look after being left in a casing for a very long time. I cleaned it all up as much as I could and let it air so it's all gone. But I was wondering if anyone here could help me understand what the origins of this liquid could be. This is a 1982 KZ550-C3 (LTD). The engine runs and I'm working on tuning the carbs. Pictures attached.

looks like water to me?????? am thinking the rust turned it brown, and the points were the root of the crystalization. I would get new gaskets for that, Is the any chance the bike was in a flood? If so you may want to peel some other covers off for a cleaning

See if the advancer is frozen up. with the engine off, give it a twist, it should snap back. You'll probably need to remove the bolt through the advance to be able to work on it. Be aware it can be re-installed 180 degrees out, so make notes/take pictures of how it is.

Check the oil too, as it may be contaminated!

Condensation trapped in there,didnt notice type of ignition but if it has points check drain hole if it has one also

:sick:
Thats a lot of moisture, had that bike been through a flood?

No idea if the bike was in a flood but I don't see evidence of water damage anywhere else on the bike (or I'm not really sure what to look for?). This does not look like a points ignition system, more of a transistorized ignition and the water doesn't seem to have messed up the transistors or the wires. I did not see anything similar when I removed the covers to change the clutch cable. The oil was dirty black but I changed the oil and put in a brand new filter.

Sorry but I'm a complete newbie to auto stuff. What's an advancer?

Please don't take offense to the following suggestion; I am totally sincere in my belief that it will be a great help to you (it certainly was to me).

I highly recommend you buy a Kawasaki Service Manual for your bike. They are usually available on eBay; just be sure to get the specific manual for your bike’s year and model. The manual contains detailed descriptions of each of the bike's various systems that will help familiarize you with your bike and how it works. It provides descriptions on what maintenance needs to be performed and how to do it, how to troubleshoot problems and test the bike's components, service limits of various components, step by step repair instructions, torque specs (very important), and a wealth of other information. The manual is loaded with pictures to help the owner understand the text. No owner of a KZ should be without one, and I am positive no owner has ever regretted buying one (or 3 in my case). If you buy and read the manual you will gain a solid understanding of your bike and be able to save time and money by performing routine maintenance and repairs. Ed

Totally agree with Ed.
We as a group here can help you thru any problem , but you need the manual to be able to put that help to good use. I buy manuals for every major piece of equipment I own as I do 99 percent of my own work and they shorten my learning curve and save me money and time.
Water inside that cover had to come from a outside source like a flood or a power washer that forced water into a small opening or bad gasket.
Clean all surfaces to a like new condition then check function, The advancer is connected to the bolt at the center of the 2 electronic pickups you have instead of points.

No offence taken to any of your suggestions here. I sincerely appreciate all your help.

The very first thing I did was download the Kawasaki manuals, both the factory manual and the third party manual(Clymer's?), from Lou's document in the PDF format. It's been thanks to these manuals that I've been able to do a lot of work already on this bike. Everything from changing the clutch cable, installing new throttle cables, changing the front tire, fixing the starter switch, installing new intake hoses on the air assembly, removing and cleaning the carbs, making new choke valve flaps from tin cans and many other such small tasks for some of you folks. But for a total newbie like me, who has a day job writing software for complex hardware systems, I couldn't have done any of this without the manuals and the many threads in this forum (including Lou's awesome website).

Now that being said, the PDF format of the Kawasaki manual that I downloaded is not searchable so it's been a pain to find a word like, say, the advancer. Additionally, some of the info for my bike is completely missing (the transistor based ignition for example). The Clymer manual is a bit searchable but the digital pics are very very hard to decipher. But I've been taking print-out's of each of these manual's while getting some of my work done. I will take your suggestion and buy a hard copy of one these manuals but which one would you recommend? The Kawasaki one or the one from Clymer (or both)???

Again, I appreciate all your patience in replying to my sometimes stupid/silly questions.

So when I turned the engine using a wrench, it must be the advancer that I'm turning, right? I was able to do that just fine without any issues. But correct me if I'm wrong.

That's gas from a bad crank seal.


...oh wait, wrong forum.