Seems like we are dealing with two problems,
As the other repleys suggest, check the packing on the gland, there is a adjustment, however from the amount of water coming in, might need packing replaced.
overheating, is your engine fresh water cooled, if so might check that the fresh water pump is working, I also had a cooler pluged on the fresh waer side.. from what you said you are getting water out of the exhaust
also I have found most engine manufactures, have engine manuals
on line free of charge...
hope that helps