the water pump/impeller is located in the lower unit. what makes you think it is working fine? It maybe the thermostat not letting the water in from the water pump/impeller. the t-stat should be on top of motor with a little cover and two bolts or in the two part cylinder head where you would remove several 7/16th head bolts to get the outer cover off to get the t-stat. but to test the t-stat just boil a pot of water stick the t-stat in there and watch to see if it opens
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