Leaking both oil and a mixture of oil and water

Gray oil is a mixture of water and oil.
Which hose is it:
images for 1993 yz250 hose

Hi mate this will be the oil & water seals the leak from weep hole is basically a warning light to tell you it needs replacing asap, you need to remove impellor, carefull not to lose the spacer washer behind it...then remove the water seal clean the surface it came from and replace with new seal. Now to do this 100% I would always replace the impeller shaft as the shaft wearing is usually what caused the seal to fail and I would also replace the oil seal which is the other side of case that you just changed the water seal (oil seal sits behind the small bearing) I would also consider replacing this bearing but maybe not critical? all up the impellor shaft the 2 seals and bearing last time I bought cost about $160... no special tools required just quite a bit of time required as you should really remove the outer engine case to access the impellor to undo it and to get to the oil seal and bearing, how ever I know guys do just open the water pump cover then rattle gun off the impellor only replace the water seal then install the impellor and cover back on then ride away! this will work and will fix the leak but is definitely the incorrect way to repair this and will be temporary fix but thought you may like to know this alternative as is very handy way to do it if your on a race meeting and just need to get through the last race or two.

hope this help cheers... Moto X Parts online.com

The only oil that can leak from iside your engine is from the gearbox. There is no sump as the engine is lubricated by the oil fed in through the induction system. Clean the area thoroughly and leave it for a while(overnight) then check again. The oil could just be overfill from the 2-stroke tank. By cleaning it first you are given new evidence to identify the leak point. Hope this helps, when you have more info let me know.

the problem you have is the water pump bearing worn you need to replace the impelar bearing and seal

The hole is a weep hole, designed to drain coolant from water pump seal leakage or oil from bearing seal leakage from contaminating either system. So one of the seals is leaking, and you should rebuild the pump.
Looking at the parts diagram it appears the impeller is threaded onto the shaft on the YZ250....hope that helps, heres the parts diagram
http://www.mrcycles.com/fiche_section_detail.asp?section=50188&category=Motorcycles&make=YAMAHA&year=2004&fveh=1236

you need to rebuild your engine sounds like you have a gasket leaking or you warped your primary