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btw. where does your exhaust go? Probably not in your heated garage. The condensation occurs after the generator ran to operating temperature and is shutoff.
The waterseperator works so and so and allows water into the fuel line when not emptied daily before each start.
I believe it’s one of the first items in the starting instructions or better, preparation to start
White smoke is usually water in the fuel system from condensation. I would check the tank cap seal.
We use diesel additive here in Kansas, that reduces the white smoke during startup.