[doodlebug]

Sounds like the water pickup tube is not alining in the top of the water pump housing. I always install the merc mariner
lower units in forward so I can turn the prop to engage the
driveshaft splines, then start the forward nut of the lower
unit without a washer to hold the lower unit while I align
the shift shaft splines. make sure the control box is in forward when doing it that way. grab the shift shaft where it is exposed in front of the exhaust housing and stab the shift splines from there.