I've got this one figured out.
My MD7A reverse gear has TWO water drain plugs. This is not mentioned anywhere in any of Volvo's schematics or manuals
There is a larger cooling water drain on the bottom of the reverse gear and another one on the starboard right of the reverse gear. The size of the smaller starboard side drain is 1/8-28 BSPP.
AND be careful when you remove these bolts (I just snapped one and am re-tapping the hole. UGH!)
When you remove the drain plugs from these two holes the holes look likes "roads to nowhere" (this is a reference to the locally infamous Road to Nowhere near Bryson City, NC near where I live
). These drain plug holes do not open into the engine like an oil drain hole.
When water is introduced into the reverse gear--if you leave the drain plugs out so you can see what happens, the water actually drains out an opening in the side of the drain plug holes way at the back. Pics attached.
I'll post more pics and exact thread sizes of my drain line setup when I fix the broken bolt problem in a few days. So far my drain cocked oil and water drains work well (no leaks).