you have two seperate problems
lets deal with the powersteering first .
the powersteering has nothing to do with the hydraulics,the power steering pump is in the front right hand side of the engine it has its own reservoir there is a filler level plug remove the plug and filll with dexron two or three the red transmission oil maybe best to first remove the reservoir and clean it out the reservoir is held on by one bolt in the centre it has an "o" ring behind it where it fits onto the pump there is a small filter which has a spring on it either replace the filter or carefully wash out in petrol ,refit and secure the reservoir the nut should have either a fibre or a copper washer to seal it fill with auto trans fluid dexron etc start the engine and run on idle turn the steering wheel full lock left to right a few times to vent the air from the system top up the oil to the BOTTOM of the hole don,t overfill
or you will get leaks and possibly damage the system.
P.S .Do not disconnect the power steering rams and turn the steering wheel with the engine running there is vrey high forces in play there and you could easily loose fingers be carefull.
Hydraulics the Massey 240 Has a mark three hydraulic system If as you say there was water in the hydraulics it is possible that the hydraulic control valve is stuck this is a job for a trained technician ,it should not take more than an hour to fix and i would recommend you get the man.
The transmission,differential and hydraulics are all common as in they use the same oil refer to local requirements re grade considering temperature etc.
Te hydrauic filter if it is blocked you will notice the three point linkage shudder ,the filter element is brass or stainless mesh and can be washed out in petrol to access the filter you must first drain all the oil from the differential compartment ,the plug is on the left hand side rear of the tractor7/8 or 15/16 inch ring spanner. the other plug is on the gearbox just below the clutch pedal,remove both and let drain for 1/2 hour 6 gallons capacity.
the filter cover is on the bottom of the transmission look for a flat surface there is aplate with three bolts 1/2 inch a/f.ring spanner ,remove the cover and you wills see the filter insid eit has a special little clip that goes through the threaded stud to stop the nut coming of ,remove the clip and undo the nut ,pull the filter out and wash in petrol and refit ,make sure you dont forget to put the large "o" ring back on.
Replace and tighten all plugs and fill with oil .
May i suggest if you are going to fit a loader or anything that requires hydraulics that you put say an extra 1/2 gallon in to keep the level good.
Hope this all helps