Re: where should the water be coming out at???
The overboard water pump indicator, was not a feature of OMC outboards until about 77 or so. They are somewhat easy to retrofit (see the top secret file at the top of the forum).
Some good advice though, replace it anyway if you are unsure how long ago it was serviced. Check the thermostats too. Pull the prop, check for fishing line around the shaft seal, and grease the shaft splines while you are at it.
I did this on a 9.9 Johnson I had picked up. It ran fine, but when I did my maintenance to it, I found the thermostat was completely missing and the drive key for the impeller had fallen out. How mine stayed cool enough to run, I have no idea. But it goes to show you that it's always a good idea to do routine maintenance on a newly acquired engine.