Re: what can happen?
One of the products of energy transfer in the internal combustion engine is heat. The heat energy is transferred to the water in the engine and then to the surrounding water. In an automobile, the heat is transferred to the air via the radiatior. You could certainly mount a big ol' radiator in the front of your boat but that's not very practical for everyday use in what we consider a "normal" boat.
As far as moving the water inlet point to the 'Y" pipe, you're allowing the manifolds to get hot enough to melt the rubber. Besides, it's more efficient to start dissipating the heat close to the source. There are applications for dry exhaust systems, especially in race boats. But again, that's not our normal pleasure boat application.