Survanta, a clinically used bovine lung surfactant extract, in contact with surfactant in the subphase, shows a coexistence of discrete monolayer islands of solid phase coexisting with continuous multilayer "reservoirs" of fluid phase adjacent to the air-water interface. Exchange between the monolayer, the multilayer reservoir, and the subphase determines surfactant mechanical properties such as the monolayer collapse pressure and surface viscosity by regulating solid-fluid coexistence. Grazing incidence x-ray diffraction shows that the solid phase domains consist of two-dimensional crystals similar to those formed by mixtures of dipalmitoylphosphatidylcholine and palmitic acid. The condensed domains grow as the surface pressure is increased until they coalesce, trapping protrusions of liquid matrix. At approximately 40 mN/m, a plateau exists in the isotherm at which the solid phase fraction increases from approximately 60 to 90%, at which the surface viscosity diverges. The viscosity is driven by the percolation of the solid phase domains, which depends on the solid phase area fraction of the monolayer. The high viscosity may lead to high monolayer collapse pressures, help prevent atelectasis, and minimize the flow of lung surfactant out of the alveoli due to surface tension gradients.