Fork breather?

[His Dudeness]

Nope, definitely not coming out of the drain, but from the seals.  I lifted the dust seal (which is covered in oil), there's oil laying on top of the fork seal and I can see it dribbling down the fork leg, caliper and disc.  Yes, I know I'll need new pads as well as a lot of degreaser to clean the disc off too.  The only thing I can think of is the fork leg is pitted at the very bottom where the seal will be when there is no weight on the bike so the fork leg is fully extended but when being ridden the seal is higher up the leg and seals at that point.  I'm thinking that if I can see any damage on the leg when I get it apart to fit the new seals, I fit the seals with a spacer under them so they bear on a different area of the leg.

The fork's not fully extended when the bike is parked. The weight of the bike is still being transferred through the suspension compressing the fork. If you did a wheelie and took the weight of the bike off the fork it would extend out further than it is now. If you dry off the around under the dust seal so there's no oil and then pull the front brake and compress the fork a load of times simulating riding along a road you will probably see some oil weeping past the seal. Don't put a spacer under the seal.