The purpose of the siphon break is to prevent a siphon been established: on my Nauticat the siphon break is on the exhaust side of the engine – it will stop a siphon forming in the exhaust system (which could in theory form if water enters the exhaust due to wave action or heeling when the engine is not running). The danger is that a siphon could allow water through the exhaust all the way through the exhaust valves and into the cylinders. Although this is highly unlikely it is possible. If the engine is turned over with water in the cylinders all sorts of very nasty things are likely to happen the most obvious being damage to the head gasket. If you do have water in your oil it is either fresh water from the cooling system or seawater which has siphoned in – in both cases the water and oil will have mixed via the head gasket. Have you checked for signs of oil in your coolant system?