See the attached picture; that is the inside of a T340 that had some "watery oil" as well. Previous owner would "let the water settle, and then run it till the filter clogged", I will boil the oil out someday, he said.
Many hydraulic oils are hygroscopic, meaning they will absorb and hold moisture. I am unsure if HY-TRAN is or not.
Point is, all that sludge that you see hanging in there has to come out. It is all holding moisture, and it will never, ever flush out by itself. In that picture, that crud was hanging there in a heated shop for 4 days - no change. It will float around in your new oil, and clog your $26 filter repeatedly. In your case, pulling the IPTO out of the rear, or the PTO delete cover if your machine does not have a PTO, and swamping/flushing all that crud out of there. Same with the gear area - take a look in there and get it clean as you can. There is the main plug below the bull gears in the rear end, a plug under the T/A, a plug under the IPTO gear by the flywheel - all need to come out.
I myself use a non-chlorinated brake cleaner that I buy in bulk. I am sure some others have suggestions. I flush/ spray it all around, and then I let it dry for a few days before I fill things back up. I have yet to have a seal fail on me, doing thus.
Best of luck with your project; I hope it turn out well.
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