I was thinking that hose should be getting water full time, and yes they get hot. I have a new impeller, just haven't changed it out yet. When I hook it up to a fake a lake, I'm still getting water out of the exhaust on either side even with the tstat closed. I did look at the water in the hose after running the boat last time, and it was hot/boiling.
Oh, it was a PCM, but had a standard 351w block put in it with all the accessories off of the PCM. Does that make a difference?
PCM or Indmar doesn't matter. The plumbing and fixtures for each is a bit different but the principles are the same. The PCM traditionally runs a belt driven raw water pump (RWP) instead of a crank driven one.
When you run with the fake-a-lake the water pressure from the hose is what is pressurizing the cooling system. Yes, it works well for running your engine in the driveway but it won't detemine if you have a leak in your cooling system someplace (translated to you'll suck air instead of water under normal running conditions leading to overheating).
You need to disconnect the water intake (usually at the input side of the sea strainer or tranny cooler if you don't have sea strainer) and attach a hose to it long enough to run over the side down to the ground. Put the end of the hose in a 5 gallon bucket full of water. Start the engine and if everything is tight and operating properly, the bucket will be empty in about 15 seconds.
If it doesn't, you need to to start looking at why it doesn't pull water the way it should.
Common problems are loose clamps on the hose connections. Check them all with a socket and not a screwdriver.
A plugged up or leaking sea strainer or tranny cooler.
A bad impeller in the RWP.
A blocked hose or partially blocked hose usually from a fragged impeller (see the post above with Messers issues)
A leaking RWP shaft seal.
Anything else that I might have missed.
You definitely need to start with replacing the impeller. A lot of the guys over at CCFan think I'm over cautious but I change my impeller out every year. Many believe that an impeller is good for several years but if you've ever had to search for the pieces of a fragged impeller in your motor, the cost of changing it out every year for piece of mind is worth every penny.
If you do have the PCM belt driven RWP you have to be careful too. Pay close attention to how they're installed when you change the impeller. They can easily be installed backwards which means that they'll be pushing water out of the intake instead of pulling it. Not a good thing. There should be a screw on them that is either facing forward or aft (depending on engine rotation) It might be starboard or port. I don't recall for sure. Just make sure that it's reinstalled the way it came out and you'll be good.
Another thing that many people don't think of is that the RWP (crank or belt driven) has a seal on the back of it behind the impeller (where the RWP shaft comes through the housing). That seal can go bad and can be replaced pretty easily. If you're getting some water leaks from the RWP itself, that seal probably needs replacing.
You definitely have some issues that need to be addressed if you're getting hot manifolds. Start with the impeller and the bucket test and go from there.
Let us know how things turn out or if you have any other questions. We'll try to help as much as we can.