Hi,
I'm a newbie myself but I am an engineer which means I must know everything!
I've got several thoughts about your post...
1) It sounds like your "milky" oil may be oil with water churned in it. When you preheat the oil, the water should fall out.
2) Since you purchased this from a waste oil delivery truck, the source may be questionable. Us biodiesel guys occasionally have an "oops" where we create an emulsion that is more like soap ...not biodiesel. What to do with it...throw it in the nearest waste oil container...or should I say, "sneak it in..." You may not have good waste oil.
3) you said this is a pressure system. Is it possible that you have an air leak somehow and you are churning air bubbles into your oil with your own pump? This would cause a very erratic flow and irregular spray pattern which would result in a poor flame.
Good luck ...let us know if you determine your problem!
Rich