What you have is a classic example of why it is nearly useless to mount a water separator on the compressor itself. To understand it a little better, the water in the hot air coming from the tank is still in vapor form so it will pass right through the separator unit and then as the air cools the water will then condense on the air line walls and then, well you know what happens then. To paint you NEED a complete system and the compressor and air hose are only part of this system you also need to cool the air BEFORE it reaches the separator and there are several ways of doing this with the most common being a fairly long properly run pipe from the compressor to the separator and then to the air hose, This pipe is very important to the system and should not be left out. The pipe must be routed in such a way that the water that collects on the walls will drain down into collection 'drops" where it will remain undisturbed by the air flow until it is drained. This may sound complicated and hard to do but it really is quite simple and has been covered here a bunch of times in detail so do a search first on "air lines" and maybe one on "compressor" and you will find in recent posts some info on how to do this. There are several good ways so check them out and decide which way is best for you or there are a couple of other tricks such as air coolers between the tank and separator. Do that search then get back to this thread with any questions you may have and you will find help from a bunch of guys who have already done this and have systems that work really good, if you do that search then yours will too shortly.