I've seen denatured alcohol used as a dryer in air brake systems. Maybe the milky substance was some sort of watered up oil?

For the record, my entire S-class experience consists of doing an over the web appraisal of a 108 with the M117 (72 280SE 4.5) and then driving it about a 1/4 mile into the garage where it now sits until DMV mails us a title. It drove very nicely and had lots of power in spite of not idling right, but I've been doing some reading on the cost of M117 repairs and I think the M130 (of which I own one) is probably cheaper to maintain.

I'm not a fan of air suspension on anything that isn't a commercial truck, but if you dig it and want to put up with some extra maintenance and repairs, go for it.

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Whoever said there's nothing more expensive than a cheap Mercedes never had a cheap Jaguar.

83 300D Turbo with manual conversion, early W126 vented front rotors and H4 headlights 401,xxx miles
08 Suzuki GSX-R600 M4 Slip-on 26,xxx miles
88 Jaguar XJS V12 94,xxx miles. Work in progress.
99 Mazda Miata 183,xxx miles.