Drascombe , Welcome to the forum!

Those exhaust holes are "Idle Relief" vents. They are there to relieve the exhaust pressure when the motor is at idle and while slow trolling. Most of the exhaust will be drawn out of the lower leg at higher RPM's. Without those holes, back pressure of the exhaust will cause slow RPM idle issues and possible overheating. It's best to keep these vents clear if possible.

If you hold your hand near those vents while running, you should get a spray of water, indicating that your water pump is working.