As I recall the molecular size of oil and water are such that the fuel filter filtering element pores are too small to allow the water molecule to pass. It therefore remains in the filter and on some pumps, like inline (as I recall)......Simms?????? they have two fuel filters, one to catch and trap the water and a second to ensure the first was successful. I have 2 on my 3000
Ford, but it has a CAV distributor pump.....course Ford initially came out with only the Simms on this tractor so I guess they just left the two in the design on CAV equipped tractors. My 2000 is an older design of the original Ford 4 cyl OHV engine and it only has one with a Roosa Master pump.
The filters have drain screws on the bottom for draining out the water in addition to the fill screws on top for filling the cavity back when the filter is changed. Haven't been into my 6530 as I bought it new and keep the fuel clean so I'd have to look up servicing procedures on that. One other thing is that I use the water absorbing filter elements on my Gold fuel filter from my diesel supply tanks. Between that and PS snake oil, I just don't have fuel related problems.