Alright, got good news....I replaced the water pump cover with a NOS OEM one which included a built in driveshaft seal. After replacing it and reinstalling the lower I ran the motor in a barrel and had pretty good water flow and engine temps. I did notice it takes a bit for water to flow upon initial startup and it kinda sputters out in neutral idle and is pretty hot even though the block stays cool. It pumps well and cool at forward idle though. Maybe that's just how these behave or maybe there is some other slightly small issue. Either way it cools fine as is so I'm not going to fool with it anymore.
After doing all of this the motor runs quite well. It has excellent compression, good spark, I cleaned the carb, and now has good water flow. The remaining issue is a doozy though as the tiller throttle is practically inoperable. I mean that as in the full range of the twist throttle is about 1/3 of the actual travel of the motor linkages. I pulled the tiller apart and the cables are connected correctly and the cable adjustments under the hood are maxed out yet it still wont pull the advance or retard very far in either direction. I cleaned and greased the trigger assembly so it moves freely so I think the cables are possibly either the wrong ones or they are stretched out. At $40 apiece that's a pretty stout additional cost. Unfortunately I think this motor is doomed to be parted out as I'm at the threshhold where every additional dollar invested is money that will never be recouped in a complete outboard sale.