Go ahead and set the lifter pre load and start the engine. Drive the vehicle for a few miles at operating temperature and the milky substance will evaporate.
Turn engine CW until #1 cyl. is at 0 TDC on comp. stroke. Set exh. on 1, 5, 6 and set int. on 1, 2, 3.
Turn eng. CW 360 degrees until #4 cyl. is 0 TDC on comp. stroke. Set exh. on 4, 2, 3 and set int. on 4, 5, 6.
Turn eng. 360 deg. until #1 is at 0 TDC once again. The rotor in the distributor will be pointing at #1 terminal in the cap.
Soaking the lifters in oil overnight may or may not prevent you for setting the lifter pre load. However, manually pumping the lifters full of oil with the push rod WILL prevent you from setting the pre load. If the lifter has been manually pumped full of oil, as you attempt to set the lifter pre load (1/2 to 1 turn CW), the push rod cannot compress the push rod seat because of the oil in the lifters. If there is only a minimum of oil in the lifters, the spring in the lifters will compress as you turn the adjustment nut to set the pre load. Engine oil pressure will fill the lifters to the pre load level a few seconds after the engine is started and smooths out. If your engine has net-lash pre load adjustment, turn the adjustment nut CW to 20 lb. torque and the pre load is set. The tapered seat on the net-lash rocker nut and rocker stud serves to lock the pre load setting.
That milky appearing stuff is vapor from coolant in the bottom of the oil pan when it is pulled up into the engine by the oil pump. (oil separates and floats on coolant). When the coolant vapor is combined with outside air, it turns milky. The coolant in the oil will boil off and vaporize completely after the engine is run at 180 - 190 degrees for a few miles.