930, there are two lines of thought here, some who have an auto drain on the compressor only will tell you to slope the air lines uphill from that point, which would allow the water to drain back in the tank and use the same drain for ALL the water. Where my line if thinking is, why introduce any more water into the tank than you have to, less water causes less rust. I installed my air system before the dryer went in, so I did actually have water to deal with at one time. But the drain you see in my pictures is at the end of the run, mine slopes downhill from the point of the compressor. I would suggest not running the water back into the tank, why create more maintenance issues? Most people only have a petcock or ball valve under the compressor, so why not just add a ball valve at the end where it should be easier access, and you will have the length of the line to better condense out the moisture. And these next two items are cheap to install but give you so much better of an air system: Slope the water away to an automatic drain (or ball valve at the end), gravity helps to keep the water moving to the end and away from most of your outlets. Install all of your air outlets UP from the main line, and then you don't need a ball valve on each drop to drain out the water, there won't be any water in there. Again, gravity works in your favor to keep the water in the main line and flowing to the end drain. But this theory plays on two factors.
First, you must have enough of the (black steel) pipe run BEFORE the water traps to condense out the water so the trap can do it's job. Most mfr's recommend 25-50 feet minimum. If the heated air does not have enough chance to cool and condense, the water vapor will be carried right through your water trap until it does have a chance to cool. Finding water after your water trap would be a good indicator your "precooling" length of pipe is not long enough.
Second, Your pipe size must be of sufficient size that the air tool (device) is not drawing up the entirety of the supplied air, as in the case of too small an air pipe (downsizing outlets), as this will overcome the effect of gravity and draw up the water along with the air.
As far as the dryer, at the time of installation (which uses R22 BTW) I already had three water traps in my air system, one off the compressor (yes, I know it is too close) and two farther down the line at my paint booth outlet. Ever since the dryer has been installed (over 6 years ago), I have not had the first drop of water in any of the traps, or any come out while media blasting for hours on end. Well worth the expense. I found mine used online for a good price. When I installed it, I removed the copper feed tubing from the compressor head to the tank, and ran the compressor head directly to the dryer, with it's output going back into the compressor tank. If you're installing a system to dry your air, why not dry ALL of it before it gets in your tank?
While the dryer sure is nice to have, a well thought out air system will manage the water issues where the dryer is not such a neccessity.