Yeah that should be the oil from the K & N kit.
Once you clean the filter they have an oil that gets sprayed on and it is tinted to allow you to see where it has been applied. sometimes it can get heavy in areas as you try to get coverage down inside the pleats.
As for the Breather re-route, I don't have a filter or Catch-can, But I have an '98 S3 and have mine vented out the rear of the bike, away from important stuff the rear tire, brake, and the emission test probe, just in case.
side note:
We have a smog test here in Phoenix, for All vehicles.
I hope that Helps,
Later
Dale