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Ah-hah! One culprit found. That baby's been dry for a while. It wouldn't really do much to reduce humidity in the in crank case, but the rust is a sign of neglect. To take care of a lot of rust (and especially the kind of rust that is in the "fleece" on that breather cap) I use a product that I found at Home Depot. The brand is Jayco, comes in a cylindrical quart plastic bottle, contents light green in color and can be found in the paint section. It is a dilute phosphoric acid. The idea is that the acid reacts with the iron oxide and converts it to iron phosphate, which is less susceptible to rust in the presence of moisture. Kind of like the concept of bluing on a gun barrel -- already rusted, just not to make that nasty red iron oxide, and resistant to rusting any further. You could probably get by with just filling that cap with oil and letting it drain, and the oil left will do the job as the whole thing was designed to do, perhaps even better by virtue of the increased surafce area resulting from the pits! For small bucks, I'd blow it out with an aerosol solvent like brake cleaner to get rid of whatever crud it has already caught, put the phosphate to it, rinse it out with water, and let it dry before filling it with oil and letting it drain and reinstalling. You could easily skip the acid part and be just fine --use a solvent to clean it out, bathe it in oil and let that oil drain out. It works a lot like the updraft section of the oil bath air cleaner in that the oil in the "wool" of it traps any dust that might try to pass by.
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