Re: '88 Penta AQ290A (GMC) 5.7L water pump impeller trouble
Welcome to iboats.
My lower unit was not (peeing) so I checked impeller. It is off center and not pulling water, not sure if water pump can be rebuilt, or needs replaced.
Your "off center" impeller is a huge problem..... actually its exactly as it should be.

The impeller is supposed to be off center. The bending and squishing of the impeller is what makes the impeller pump water. Not sure what you mean about the outdrive "peeing". The majority of water exiting the outdrive should be coming out of the exhaust port. When you were running your engine, I assume you were running it on muff's with the garden hose turned on, right? When is the last time the impeller has been replaced BTW?
Another item to check is number 25 in the picture in this link. More specifically, where the inlet hose connects to part #25. The;
http://www.volvopentastore.com/Inte...*****.278377226--store_id.366--view_id.780525
The neck on that part will corrode away (especially in salt water), and allow the impeller to suck air rather than water. Take the hose off that part, and take a good look at it.
I also noticed a small drip from front of head gasket. Motor will crank, and zero water in oil.
I am assuming this is a water drip, not oil, right? Are you sure the drip is not originating around the intake gasket and following the gap between the head and block down? If you suspect a leaking gasket, now is the time to replace it before you have water in the oil, or hydro-lock the engine, or get stranded.