I'm running my 1985 300SD on Waste Veggie Oil by using a two tank system I got from GreaseCar.com

I have an on-board filtering system that warms the oil using a send and return hose off the radiator and filters down to 5 microns. It's worked great for me unless I try to filter WVO with too much water. You can identify the watery stuff by it's milky look and gravy like consistency.

What I have started doing is collecting WVO from my sources, dumping it into a steel 55 gal. drum at home & using a barrel heater to warm it up to 100 to 120 degrees to boil off the water. This also lets the particulate matter (french fries, chicken batter, etc.) sink to the bottom. Then I use a diesel pump to suck the oil from the top of the steel drum, through a 5 micron filter bag and into another 55 gal. drum. Doing this has extended the life of the WVO fuel filter in the engine compartment and I don't have to worry too much about engine performance vs. poor fuel quality.