I will try to explain my issue to the best of my ability so please read carefully as I have asked questions along the way. If you have any ideas or questions please notify me.

I have a Goodman 2.5 ton split system heatpump installed in my 67 year old 1100 square foot home. The air handler is installed in the basement wich is very damp. The basement has one exterior door wich remains open most of the time but there is no other ventalation down there so it is considered an unconditioned space. The air handler sits horizontally (level) on 4 concrete blocks and they are sitting directly on the dirt. The air handler has a trap and a place where you can prime the pipe with water (should this be capped?). The problem is there is water inside and on the outside of the air handler and the insulation inside the unit is wet. The water is dripping out of the pipe wich runs to a nearby sump where its pumped out. If I leave the air handler fan on all the time then switch it off the water runs out of the pipe quickly and it also runs out the end of the unit where the intake is attached. I think its running out of the front cover on the air handler. I leave the unit in auto mode most of the time but prefer it stay on since there are smokers in my home.
Any ideas where to start what to look for or just any help at all would be greatly appreciated.