Re: causes of alarms
I have the 90 3cyl 2 cy also. I have had two engines with temp problems, the current one and years ago an OMC. Funny, both had "stuck closed thermostats". The outcomes were very different because of the advanced design of the Merc.....course it was a 30 year later model....in all fairness to OMC.
I have the manual and just checked that the solid alarm is in fact temp. The fact that you are having the alarm and rpm problems at the midspeeds and above tells me that your low speed cooling system is working.
Low speed cooling system: Impeller ok, water passages from lower unit pickup holes through powerhead are clear, telltale squirting a nice solid stream....mine shoots water a couple of inches under the surface at idle, thermostat opening at 140F and above. This system is your cooling loop through 2500 rpm's. And I guarantee you, that if the stat sticks closed, the horn will sound (at the lower speeds only) and the water jacket cover (where the temp sensor with the single brown lead is located) will be uncomfortably hot to the touch.
High speed cooling system: Same as above except the pee stream is really squirting now and two other things happen:
1. The ears on the impeller blades bend back and the water pump is pretty much out of the loop due to ram water pressure from the lower unit pickup holes. It could be worn out, but I'd suspect a broken blade or foreign object ingestion in the cooling loop first, due to the rpm's where you are having the problem.
2. The bypass valve opens and allows water to bypass the thermostat. This channel has a much larger opening than the low speed loop to provide for the extra heat load on the cooling system at the higher rpm's and, as happened with me on this engine, if you have a horn at low speeds, you can get above 2500 or so and after a minute or two it will go out and slowing back down will cause it to blast again. BTDT
The fact that rpm's drop off is not a good sign and you may already have permanent damage; but you can inspect for that easily enough.
The rpm drop-off can be caused by the pistons getting hot and expanding in the cylinders to the point where the piston skirts drag on the cylinder walls and this resistance limits the engines rpm's. BTDT with the OMC. If you stop and let things cool off, you can run up again till it gets hot again and you can continue to do this till the engine actually siezes and will not move....BTDT too before I figured out what was going on....with the OMC.
------------
Looking at the rear of your engine, cover off, the water jacket is right in front of you. Upper left corner of it is a bulge, a cap/cover if you will with half a dozen bolts holding it on. The small circle of it is where the thermostat is covered, and the large circle is over the bypass valve.
Remove the cover and inspect for obstructions, especially where the bypass flow occurs. I would think that you would find something very obvious. While the stat is out, just for grins, put it in a slowly heating pan of water and with a candy thermometer or what have you, check for it to start opening at around 140F. The hotter it gets the wider the opening.
Also, while the cover is off, and the components are removed, put the engine on muffs and turn it on....water should freely flow out of the powerhead via those holes (as soon as it gets up there). As soon as you verify that shut it off (the engine) as the top of the top cylinder is getting no cooling.
Then look where that water would normally discharge if the cover were in place and take the water hose to that discharge port and you should get water coming out of the prop.
Once you get through that and fix what needs fixin, pull the sparkplugs and with a small flashlight check the sidewalls of the cylinders. They should be mirror smooth. Any chunks of alum, or scratch marks are signs of what I said above and further investigation is required.
The next thing to do if it looks bad, is to remove the exhaust water jacket cover and all and look in the exhaust ports of the cylinders. As the pistons go by you can get an idea as to how bad the damage is.
If the cylinders are not all scratched up with gouged pieces of alum embedded in the rings and all, and you find your obstruction/problem in the cooling loop, You should be good to go. I think I'd fog the cylinders, just for grins before I went back to the water.
If damaged, you have to decide if you just use it like it is once you have found the cooling problem. Very well may be that once you keep the block cool, with slight damage, rpm's will return to, or very close to where they were prior to the problem. Otherwise better find a couple of K for an overhaul....bore job, oversize piston-rings and that sort of thing.
Would be interested to know what you find.
HTH
Mark