You do not return the oil back to the engine, that defeats the purpose of removing the condensation out of it. You do not want to dump the milky sludge back in, you are trying to remove it. I'll try to remember to take a picture of it but it is not very descriptive of what it does. Just a blue (painted) canister.
Venting it to atmosphere allows it to vent but doesn't create a positive ventilation. Also just allows the fine oil and water mist to collect in the tube and drain back down into the engine.
We rode hard today and I'll take a picture of the milky sludge when I drain it also if it's not raining.