I have an I/o and have thought several times about running them out the transom. We have engine weight issues that the other cc's don't have.I think if you are filling up with water that much that if you do a bunch of measuring that you will find that you will not get good drainage if you put them at the waterline because that is where your deck is and it's why the water is coming in.
Something weird is going on if it is coming in while running-perhaps the blocks in front of the scups are missing? It should be draining while you are moving.
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