300tdi Injector Pump Problem?

Got a funny one here, disco has been running rough recently, smoking with a serious loss of power and I parked it up planning on looking at it when I got a chance. Came to look at it today and it won't start, the fuel is coming out of the injectors a milky white colour which I'm assuming is heavy water content.

Sedimentor has been bypassed by a previous owner sometime in the past, so I drained the (recently changed) fuel filter to find a 50/50 water/diesel mix. Disconnected the fuel pipe to the manual mechanical pump and stuck it in a clean can of diesel as I thought I must have contamination in the tank, and this is where it gets confusing. Have bled every join in the fuel line up to the injector pump and got clean diesel through all of them. The low pressure line into the IP was bled with clean, clear fuel with no bubbles at all, but once the fuel passes through the pump and out to the injectors it's still as white as milk and the engine won't run at all.

Not having any knowledge of how the pump works I don't know wtf is happening to the fuel in it, all I can see is it turns white and the engine don't like it. Any ideas what might be going on? Has been cranking with the injectors cracked off for ages so I would've thought the clean fuel would be well through by now, so any suggestions would be appreciated!

Are you sure it is water - and not air? fine air bubbles will make doozil appear milky.

What chance is there for water contamination?

try warming some doozil, to drive off the water/air and also leave some to settle. if it splits into two liquids it will be water, if the volume reduces slightly, but it is all doozil, then it has to be air.