I think if you put an inline filter in you'd be surprised to see the water it catches. I have used some of those disposable gel filters that change color when they get full of water and they don't last very long the few times I've painted something with my setup. I have 2 water separators where the flex line meets the hard line, 1 separator off of the air chuck, and one more on the paint gun right before the disposable filter.
Most of the time the air appears dry, but if you really get after something with the blowgun then drops of water start to show up after 5 minutes or so of continuous use. And this is in Dallas, its humid as balls down here.