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I don't know if this was mentioned above or not, but you do not want to install a water separator or a dryer closer than 30 feet from the compressor. By having 30' or more of line the air will cool some and release the water before it hits the trap and therefore the trap can do it's job. If you install the trap too close the air will still be warm and will pass through the trap and condense in the hose therefore spewing out of the hose.
Kinda "Bubba-ized", but here's the setup I used to paint my '68.
2 Craftsman compressors running into regulator and then into 3/8" hose. I had a 1/2" hose, but I couldn't get the required inlet pressure (still haven't figured that one out). The big brass fittings at the regulator are check valves to keep the air from one compressor from going into the other. It worked out great.
A little closer than ideal.... but its only an filter/Reg.... Make sure to put copper lines after this unless you plan on running a filter at each outlet.
I had some leftover paint from last year when we painted my front bumper - I am now the proud owner of a red cardboard box
It took a lot longer to clean the gun than it took me to get it adjusted and spray paint.... what a mess.....
I added another water trap just out of curiousity, I wanted to see if there's water in both or just in the first one. Surprise: the first (orange) water trap had a lot of water in it, the second (clear) was dry.....
I'm sure that set-up will work fine. Just be sure to have an in-line filter at the gun. Cleaning the gun does suck. It takes me about 45 minutes to clean mine completely.