it's located under the water jacket, attached to the head . you can find diagram and parts list here. also replace the poppit valve at the same time.
"http://www.evinrude.com/en-US/Accessories/Literature/"
It is not the thermostat causing that. There should be water going through even if the 'stat is closed. Go back and take another look at the water pump. You are missing something. While you are in there, try blowing air or water up through the water tube to see if anything is plugged up.
Make sure the impeller pin is properly inserted and that the impeller is not slipping on the shaft ring. Also, can you see if the copper tube is properly inserted into the pump housing's rubber grommet?
If you removed the water pump, there is a slotted stainless plate that the empeller sits on, if by chance it was put in backwards it dosen't allow the amount of water that is needed to cool the motor until you get it reved up a little.
