Air Compressor's leaking Oil and generates water.. help?

I bought a couple of new Air Tools today and I've been running the compressor pretty extensivly. I wasn't really checking on it since it sits in the garage while I work outside.

When I was done for the day, I came back in to drain it and shut it off when I noticed it leaked a good ammount of Compressor Oil on the floor and on the tank. It was pretty dark so I couldn't spot where exactly it had leaked from but is this a really bad sign or is this something common? It seemed pretty hot too. I think it might have lacked clearance space around it since my partner was moving stuff around near it. Could that make the Oil boil and leak somehow? It's a really cheap model from Taiwan or something but it does the job :P

It's also generating allot of water. Some actually escapes through the hose when I use tools like the Die-Grinder and Air-gun. What can I do? I drain the tank every time I use it. I was told to remove the drain bolt when the compressor's not in use which prevents rust. Is this true?

Any help is grately appreciated. Thanks!

I figured it out.. a weld broke on the seam that links the tank to the distribution valves :(

Do I MIG or TIG weld those back?

well as for as the water issue goes, they have water accumulators to help fix that problem. ive read somewhere that water can mess up the tools(you also have to keep tools oiled).

Yes, you MUST use a drier, and a regulator can be helpfull. You can purchase both at Walmart in the automotive section. Not very expensive. Good Luck.

Like you mentioned, most compressors have a drain tap on the bottom of the tank. I have a water filter inline, and it doesn't accumulate much moisture if the tank is drained regularly (every 6 months in this case).
Try running the compressor with the tap opened, on a dry day? might help clean it out.