It could just be that the bike has often stood for long periods between use, and that condensation has built up inside the transmission case. The condensation will cause the oil to emulsify, turning a greyish colour, and break down.
Change the oil, run the bike to normal operating temperature, then drain it again to flush all the "dead" oil. You may have to do this a couple of times to completely clear the casings. Keep an eye on the coolant level. If the level starts to drop and the oil continues to turn a milky grey colour, then it is most likely the water pump seal that has failed.
There are a couple of oils on the market that have a "milky" appearance however, but they are usually coloured, not grey.
I will contact RockOil to ask if their light gear oil is suitable for the NSR, but I would not recommend it until I have the facts. _________________ Andy.
NSR-WORLD.COM
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What problems would tainted gearbox oil cause? I've got other issues with the bike, just wondering how related these things might be. Its in the shop right now so will definitely inform the mechanic, although I would rather do it myself as labour costs $76 an hour _________________ '87 MC16
The tainted oil will not do it's job correctly. Get rid of it. You can also add some diesel in when you change the trans oil to flush the system. Don't leave it in though, just use it to flush out the old crappy oil. I see this a lot on bikes which are left outside. Hope that helps. _________________ To much HP is barely adequate!
hello everyone i was wondering what tranny oil to run and from what i have read here that i can use the same oils i use in my yamaha rd's basically a 10-30 gearbox oil like lets say motul? if not please advise! and thanks _________________ DAYTONA SPECIAL,74 RD350 LONG ROD, 2 RD200 ELECTRIC'S,88 NSR 250RG, MICRO SPRINT CAR W/CR 250 ENG
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so probably time for replacement! 
