Oil In Coolant

[kohlers]

The previous owner replaced the engine in my 2000 323i because it was cracked after running hot. The "new engine" was said to have 84000 miles on it. Hoses were replaced. After installation the cooling system was flushed a couple of times. This was just before I got my beamer about a month ago. I just discovered that there is still a lot of oil in the form of brown sludge in there. Much of it floats on top in the filler neck of the expansion tank and also clinging to its walls. I have removed some of this stuff by adding coolant to make the sludge float up so that I can siphon it out.
The question is:Can that oil cause any harm. It is probably clinging to the hoses even after the flushes and is inside the expansion tank but I am thinking of replacing the tank as recommended in other posts. Maybe also the water pump.
I do not have any problem of over-heating. Never over the needle straight up.
I do not think the oil comes from the "new" engine. It runs great and the oil looked normal at a recent oil-change.

[witeshark]

Oh, that sludge material needs to be removed ASAP!

[carguy13]

here is some stuff i found...i hope it helps.

Fourtitude Forums: Brown Sludge in coolant

VWvortex Forums: Brown Sludge in Coolant Expansion Tank

[FCPGroton]

You need to get that system flushed again. You can do it yourself by draining all the coolant then filling it back up, drain, fill, drain, fill. Do this until all the water coming out of the car is clear. Then fill it half way with distilled water and half way with coolant. Run the car for a few days and hope it stays clean. If it doesn't, you may have a head gasket issue.

[CanadianWraith]

use hot water when you do your flush, cold will not do alot to remove oil

[kohlers]

Thanks for all the good advice. Using hot water seems a good idea. Should I run the engine to circulate the water between fills and drains?

[CanadianWraith]

yeah, just keep an eye on your heat gauge