In the picture, the short hose on the left side, is that your exhaust cooling
If so, It's on the wrong side. It should be on the downward side and not the upward side. If it was like that before the rebuild
that could how the water
got in the motor
. The cooling
line is suppose to cool the exhaust outlet, only. Water spraying into the direct heat would cause steam.
Another thing too! There should not be a rubber hose so close to the outlet like on the right side. There should be more metal (to be cooled) leading down to an oulet tube. It looks like a bad set up to me!
As for a riser, that depends on where the motor
is in relation to the waterline.