Hi,
I fitted a oil separator / feed heater to my experimental boat a few months ago (see the "flash steam plant control" thread for photos). The water is discharged overboard during the run without any trace of oil.
Every now and then, I remove the oil separator and flush it out with boiling water and detergent, much as you would with greasy cooking tins, and flush it down the sink; really not much oil is used in practice.
The other way is to let it separate out in another container and syphon out the water under the oil. After many months(if not years) the container, with just the oil in it, can be taken down the local council recyling centre and be disposed of as per engine oil.
Ian