donavan,did that guy have his compresor mounted sideways,or straight up? if hes got it mounted sideways,it may have simply been overfull. you have to be careful bout filling them up to much,specially when mounted sideways,and the oil can get sucked into the cyls and blow the little sucker up,much like hydro locking an engine.
i hav emine mounted vertically,and it doesnt seem to use,or spit out much oil at all. i check it now and then,and it never seems to be much lower than the last time. nonethless,an oil seperator is prolly not a terrible idea. it would prolly be beneficial for the air tools if some oil seeped out
but could eventually fill up your storage tanks if you dont have drains
a water seperator is also reccomended,mine spits out lots of water(despite having drain plugs in the bumpers and periodically draining them) and as a result,all 4 of my tires prolly have 1/2 gallon or more water in em by this time
i will defianely be adding a water seperator to mine after i get my new tires mounted,in order to keep that to a minimum