Hi,
The oil level looks to be a bit on the high side. I keep mine at about the middle of the circle.
When using the compressor I tend to bleed the tank and empty any water that has accumulated every 2 days. If I'm not going to be using it after one session then I'll do it there and then.
Can you post a pic of you setup. All of my water and oil filters are at the compressor. I use different hoses for spraying to those that are used for other devices.
To empty the compressor I usually have some cleaing up to do so out with the air gun and once all the air is gone I'll open the valve and empty everything.
Now this might sound a bit on the bad side but....since I think you have overfilled it a full strip down and clean may have to happen.