watery bread pudding

32 what? whole milk...?

Sounds like a simple problem; you're baking miles too hot; the eggs are forming a solid matrix (a dense gel) and pushing the water out of the milk.

Water bath is good; temp is not: I would recommend Reducing your temp to less than 250F and cook for a whole lot longer. Remove as the eggs hit about 175F or are set in the centre.

if you find that your custard is cracking then thats too long. Nice and slow is the secret of success to wonderful custards.

You could learn a quiche trick from the french and put it at the BOTTOM of the oven and remove as it begins to bulge (but not crack).

 

In addition to overcooking your eggs it could also be a problem with your using milk, since it will split when heated to a high (nearly boiling) temperature. If you're going to cook it at a higher temperature heavier cream (18+ milk fat) will help add stability to your pudding even at higher temperatures.

 

Can you lose the heater fan? Custards (bread pudding falls into this category) is a low and slow food. Instead of waiting for the dessert to brown in all that heat...pull when the temp hits 170-180 and leave covered until cold again (in the reachin/ walk in...gotta think about the Food Saftey Police). To brown the top...throw down some sugar and fire up your kitchen torch or a Bic lighter held in front of some old timey Aqua Net hairspray. Last is not food safe but the result of a heated (pun) kitchen argument.

 

I'm sorry to disagree chef; however milk can be boiled to kingdom come (as far as all the milk i've used) without splitting. If that was the case then even making UHT milk would be impossible.

However if you heat the milk, stir and cool, then its possible to form butter crystals which can leave behind a watery mess...? However most homogenised milks make that rather difficult. This would never happen in a custard as the proteins in the egg coagulate between 72-80 deg C depending on liquid/protein ratio and set the fat globules in place.
If you go beyond this then the proteins contract further and squeezes out the water from the gel.

Simple answer; don't go so high.

 

Try warming the milk so you are not pouring cold liquid over the bread - this will help the bread soak up more,
Cover the pan with foil during first half of baking.
Do not leave covered as this will produce condensation.
Temp should be fine in water bath.
Half cream and half milk makes for a richer product