I bought the exact same one from HF and had the exact same problem. I took the unit and mounted it up in a corner of the shop on a work bench. I took that separator thing off and threw it in the trash. Where that separator screws on is just a pipe thread. Now underneath the bench on a second shelf I took a 5 gallon portable air tank and made a catch tank out of it. Welded a bung in the top rear of the tank. Then welded a bung in the bottom front of the tank for a 1/4 turn drain valve. Ran a high pressure hose, from that pipe where the separator was, to the top bung in the tank. Now the water drains into that tank, and every few days I just crack the 1/4 turn valve and drain it.
The other big problem with that dryer is it gets too cold and freezes the moisture in the line. This can be a big problem when we are running the plasma cutter and suddenly loose air pressure. Could also be a big problem if you are in the middle of a nice paint job and loose all your air. Down load their owners manual and it tells you how to adjust the temp so it won't freeze up.
We now run it it all day every day as it keeps the moisture out of all of the shop air, which is good for all the tools also.