Question on engine oil and test running synthetic?

Newer coolants and oils when mixed don't always turn milky. Used to be that way. Coolant reservoir has not gone down so that rules out coolant. Did the test actually say positive for water or is that your conclusion? Failing the flashpoint test suggests fuel dilution. Further tests can be run to confirm and quantify fuel dilution. Auto trans fluid is many times red but even if you had an auto trans don't see how that gets into the engine. And you would have trans problems from low fluid level. Any other fluid besides fuel you would notice a drop in the level.
You say that the level keeps going up. Are you draining off the excess or running with it overfilled?

Red Diesel, What is it?
It’s known as red dye, red fuel, farm fuel, off-road diesel and even cherry juice, and it’s the same ultra low sulfur diesel (ULSD) you’ll find at your local filling station. The only difference is that it’s been treated to an oil-soluble red dye for identification purposes. What purposes? Primarily taxes. Red diesel fuel is taxed significantly lower than regular diesel fuel (i.e. clear fuel, or non-dyed fuel) because it isn’t intended for on-highway use.

 

I'd bet fuel. Get some dye and a blacklight

 

Stick your finger into the blowby tube. Water or coolant evaporates and will be noticed there because it rises. Milky or water droplets ypy'll know.

Fuel can be felt in the oil. Sounds weird, but think of the feeling a dry wine feels in your mouth, fuel in oil will feel similiar between two fingers.

You won't normally see coolant actually in the oil due to that evaporation, so you wouldn't be able to see it in a sample (unless severe) Often it will accumulate on the bottom of the fill plug.

 

A drop of oil on a paper towel, any fuel will quickly separate and wick out around the oil.