Well after digging in the filter and uncoiling the paper in the filter my mind is made up. It is coming out. The filter was probably getting to the point of being restrictive so I am sure the bearings saw some trash with the oil bypass not blocked. With a 700HP engine, I dont think that gambling on marginal bearings is a good idea. Here are some pics:
from the oil in the filter paper
from oil in the canister
in the canister
Sucks, but looks like the there is something bad happening.