Water can get in through either one of the valves if they are open while sitting in the rain. I had a horizontal engine on a tiller this last Summer that over 3 quarts of water in the engine so much that it had push out all the oil.
As if ethanol it depends, is your fuels dye for off road use or otherwise. If it was here it could automatic transmission fluid or off road diesel fuel; both are red in color from the dyes. Of course we also have Stabil Fuel stabilizer that is also red dyed.
