Any condensation build up in the
oil will 'boil off or dissipate' well below the 'boiling point' and indicated
oil temp if you give it enough time (30 minutes at continual operating temp should do it). Besides that the ACTUAL REAL
oil temp is considerably higher than the gauge indicates. The oil is 'splashing' and 'under pressure' to some VERY hot individual areas of the engine. Like the heads and near the combustion chamber. Oil, like water, is designed to carry away this heat as well as lubricate. The ACTUAL REAL water temp is also higher than the 'average' temp reading on your gauge. But it is perfectly acceptable to read the 'average' and not worry about the 'momentary' spike in elevated temperatures as the oil and water travel through the engine.