The soot is from combustion of the engine, being captured by the steam in order to filter it out.
Maybe take a look at this:
http://upload.wikimedia.org/wikipedia/commons/8/8b/Surface_Condenser.png
It runs cold water through and the steam condenses on the cold pipes inside. Pretty much how an air conditioner makes so much liquid- water vapour is chilled on the coils and condenses to liquid.
Interesting setup, but I am still confused as to how it works?
I would say you should get yourself a good electric kettle, strip the heating circuits out and put them in a well made pressure vessel with LOTS of safety precautions. Blow off valves, a safety cage, ground fault breakers. Then you can do away with the compressed air, as you have pressurized steam.
**Note that if you are going to hurt yourself please don't attempt this, I have done such things before so its up to you whether you think you can do it in a safe manner!
For test purposes ice water would be ok going through the radiator, then if you find it works perhaps move on into ac systems/