So water flowed through the powerhead when you attached the leaky garden hose? At this point, I would go a little deeper into this troubleshooint technique. First, I would make up some sort of adapters to minimize the leak between the garden hose and water tube. Then, I would turn on the hose just slightly to get water flowing through the powerhead. Next, I would start the engine to see if water continues to flow through it while running. Exhaust leaks into the cooling system can create enough back pressure to slow/stop water flow. Again, don’t over pressurize with the garden hose!
Back to the gearcase. Have you had a close look at the water tube? Are you sure the water tube is seating properly into the impeller housing grommet? If previously misinstalled, the water tube could be bent and not seating into the impeller housing grommet. Next, I would remove the impeller housing and SS plate. A proper seal between the SS plate and the gearcase casting is very important. The aluminum could be damaged, eroded, not making a good seal. If there is a leak in this area, the water pump will pull exhaust/air instead of water. Have you pulled off the SS side inlet cover? Perhaps there is crud down inside the water pick up area blocking water flow into the pump. Is the water pick up screen crusted over?
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