I recently purchased a somewhat abused Trek FX 7.3 and have been slowly going through and servicing everything. I am relatively new to cycling, and bicycle maintenance, but I am fairly mechanically inclined and I enjoy doing my own maintenance. Today, when I opened up the headset, a lot of water flowed out onto the ground. I have had the bike in the garage for the past 3 days and it has not spent more than 20 min in the rain the week before that. Why would there be so much water in there? The headset is a cane creek aheadset slimstak which has semi-cartrige, sealed bearings and everything still seems very smooth for now. However, I am worried that with so much water sitting in there for who knows how long, there could be some problems in the near future... Any recommendations/concerns? Should I replace the headset? Just replace the bearings?

You need to do the inspection, pull the fork out, and repack the bearings..

Is this the bicycle that you bought?

Make sure your steerer isn't filled with debris, water shoud drain out by itself.

A lot of all-carbon or carbon with metal steerer forks have a solid bottom to their fork crown so any water that gets into the steerer can't drain. Also, some headset top caps have an open hex hole to accept an allen wrench for preload adjustment or have a poor seal around the top cap's preload bolt. Either can admit water.

You don't hang it from the rear wheel for storage in the garage, do you...? If the headtube is the low point on the bike, water from elsewhere inside the frame could be migrating there through various manufacturing vent holes where tubes come together.

There was no debris and it is always parked flat (no hanging). Upon inspection, there's no reason water should have been trapped in there. Strange... I'm just going to do an overhaul of the headset this next weekend and replace anything that shows damage or wear...

HA! No, I got a way better deal on this one:

Don't forget to check to make sure that the head tube isn't where that water was being stored... Some quill headsets will allow rain to slip though around the stem and settle into the frame on top of the lower headset... I have seen it. After you finish the servicing (on a quill), push some grease into the gap between the stem and the headset. The other posters have mentioned the open hex hole in some modern headsets... I would be sure to find a what to block that off.... Maybe a small bolt, like from the rack mount, and a matching washer and put them into place with a bit of silicon caulk (aka clear aquarium glue). On second thought you might want to use a hair dryer to really make sure the head tube is dry and coat the inside with the same silicone before putting it back together.