Mysterious blue residue? Exhaust leak?

This isn't uncommon. This is an exhaust leak. You can try loosening the pipe nuts up at the top where it comes out of the head and reposition the muffler a bit to better align the joints and see if it seals better. I would also apply some anti-seize on each knuckle first then re-tighten the pipe nuts. You can try tightening the springs a little more. Lastly you can take some header wrap and apply it around the joint.

Good advice!

What type of antiseaze would you recommend?

Lost all of my response - giving it another go.

Hi Nick,

First - I consider all exhaust leaks to be serious (there are no small/insignificant/tolerable leaks) with the potential to cause CO poisoning of the pilot and/or in flight fire, both resulting in a high chance of DEATH?

Further to RL's excellent advice;

Rotax Installation Manual 78-00-00 Exhaust System - "The ball joints should be greased with heat resistant lubricant (ie.: LOCTITE ANTI SEIZE) to avoid jams and locks of the ball joint"

I interpret this to mean:

Liberal (love the stuff ?) application of anti-seize on all exhaust system moving (before final instal) parts. Moving parts=exhaust ball joints & exhaust flange - head  (wear disposable gloves, the anti- seize  is wonderfully messy) .

Install system, connecting all springs but leaving flange plates loose.Flanges & ball joints must be free to find their own position.

Shake/move system gently until you judge movement/settling complet. Do not attempt to use the flange nuts/studs to hold the system in your prefered position.

Tighten flange nuts progressively & evenly to specifications.

If the above does not cure the leak - suspect:

Hairline crack in silencer/muffler casing - replace muffler or repair (cheapest option but usually short lived)

Weak exhaust spring(s) - replace

Poor alignment of exhaust ball joints - re align exhaust pipes. This is likely to require cutting & joining of exhaust system.

So is it possible to eliminate these leaks? Or are small leaks just part of the game with Rotax? The design is pretty poor. I was using exhaust heat wrap before and I think it was hiding some of these leaks. 

Is there any type of sealant that can close the gaps in the exhaust ball joints.

I’ll give it a go trying to adjust everything. 

should I adjust all of the pipes or just the main one that’s causing the problem?

airplane was supposed to go to annual this week. No way I’m flying it like this.

Video of leak