Hey guys, need some motor insight....

Here is the big picture, my first kid is due in mid-July and I really wanted to get my Can Am running and driving reliably before the kid shows up because I don't know how much time I will have to work on it in the future.
Okay, enough babbling, here is the situation-

I had one of my LT-1 buddies come over to help me adjust the rockers on the Canned Yam (Old School Pontiac 455, mild hydraulic cam). So he comes over and the Yam starts right up and we get to work.
We get them adjusted and the car is sounding awesome with a nice lope.
What's odd is that there was no oil squirting out of the pushrods. We figure that it will squirt out at higher rpm because the oil gauge reads 50-60 psi.

After we get the rockers adjusted we rev it a little and no oil squirts out- none.

So we check the oil and there is plenty, but it looks like there is some water in it, which wasn't a total surprise because it had an open shaker hood scoop and we had gotten some serious rain in the past few weeks. We eventually decide it is definitely rain water because there is no green tint to it at all and when drained in a clear bottle it did not separate. Now, I know there was pressure because the car had been started and run a few times; it just wasn't getting to the valvetrain.

We figure something had to be up with the lifters so we pulled one of the lifters and the only way to describe it was "water logged". I took it apart and cleaned it and it went back together fine. So here are the questions:

1) Would water in the oil cause the lifter not to build up enough pressure to move the oil to the rocker?

2) If the lifters are the problem, can I pull each one out and clean it, then soak it in oil and re-install? Would running motor flush though it be sufficient (I don't think so, but if anyone has any magic cocktails for this let me know).

3) Do I need to replace the lifters? The problem is that the cam/lifter/pushrod/rocker setup was bought as a kit before I owned it. The pushrods are not the factory length. The lifters look different than factory (smaller hole in the side, better looking finish) and are easier to compress. The car also has crane 1.52 roller rockers on it if that helps.

4) Am I just F'd up and looking at the wrong problem? If anyone has any idea of anything that could cause this please let me know.

Sorry for the long drawn out post- I just wanted to give out as much info as possible. Thanks in advance for any info anyone can give.

Jeremy