Yep, the Mercedes patent says "3. In the construction of the composite internal combustion piston engine the lubrication fluid is water based with additional additives."
This isn't a biggie. You can buy water-based hydraulic fluid. It's typically used in construction machinery that operates in environmentally sensitive areas.
The problem with a steam engine is that when you boil the water the additives are left behind. It doesn't take them long to foul the boiling surfaces.
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