What causes the coolant color to turn milky?
Oil tends to turn antifreeze a milky color if enough mixes in.
The head of an engine is cooled from passages in the block. When you blow a head gasket the coolant gets by the passages and into the combustion chamber. Sometimes the coolant doesn't go into the chamber but goes into the oil pan causing the engine oil to turn a milky brown color (looks like a chocolate milkshake).
The water light and check engine light came on in your mercury marquis 1998 and the water gauge went up when you turned on the air conditioner it went down but your check engine light is still on?
If you aren't seeing oil leaking in the driveway then it almost has to be burning it due to worn valves or pistons. There most likely is exhaust smoke but you just can't see it yet. One other thing to check is your engine coolant. A leaking main seal will allow engine oil into the coolant side of the engine which will turn your coolant a milky white frothy looking liquid.