Water in the fluid comes from 3 places, washing the unit with a pressure washer and getting water up under the seat and in the transmission case breather hose, Kubota's all have a breather hose / port to equalize the pressure in the case from hot to cold and it will also accumulate (condensation) in the case from running it and not running it long enough to 'boil' out the condensed water so it mixes with the fluid and it turns milky. Finally, letting the unit sit outside in the weather and allowing rain to get in case.
If I were you and you have a bellhousing drain plug, I'd pull that and drain the clutch housing too.
In my case, I'm working my tractors pretty hard so the fluid gets hot and vaporizes off the water which comes out the breather hose as vapor.
You need to drain the old coolant and get some quality radiator flush and clean it out. If you are really cheap, a little Dawn dishwashing detergent works too with clear water.
If the coolant is rusty, you ran it way past it's useful life. Tractors big and small need to be maintained or they let you down when you need them,
