Take a look at the coolant as well...see if it looks funky too.
That milky residue on the oil cap is a classic symptom of a blown head gasket/cracked head/block. Sorry dude.
That engine won't last long with water in the sump. If it doesn't overheat itself to death, it will spin a bearing, or develop a knock/throw a rod.
It's probably still in the early stages if you didn't see any milky residue on the dipstick.