The VRO was incorporated in 1984.

70773S is a 1977 70hp Evinrude, not a 1978. Either year is a very food design.

Water is mainly discharged out through the propeller to help keep the propeller hub cool.

Those two top holes... read on:

(Exhaust Relief Ports - Exhaust Housing (Inner/Outer)
(J Reeves)

The long housing between the powerhead and the lower unit is called the exhaust housing. There is a inner housing within it that has a heavy duty seal around the bottom of it, or heavy duty seals around a inner extension between the housing and the lower unit.

The red hot exhaust travels down thru that inner tube and out the propeller with a somewhat supply of water to cool the propeller hub. A good amount of water surrounds and fills the space between the outer and inner tube, otherwise the outer housing would get so hot that the paint would burn off.

Some water pumps, for some reason (********g even when new) exert a great amount of water pressure, and if the exhaust housing seals are in perfect condition, the water fills the tube to a point of overflowing.

This brings into play those two holes or slots, whichever the engine might have, at the top rear portion of the exhaust housing just below the powerhead.

Now, if those two holes/slots weren't there, water would continue to flow up into the cylinders. Water not flowing out of those holes is no concern for alarm UNLESS that outer housing suddenly becomes extremely hot..... the warning horn should sound long before that happens.

The main reason for those holes being there (exhaust relief holes) is that when at an idle, there is an extreme amount of resistance encountered by the exhaust trying to escape due the fact that the outlet via the propeller is now blocked by a wall of water. The escape route in this case is for the exhaust to escape out those two holes, otherwise the engine would slow down quite quickly and die. If exhaust cannot escape, air/fuel cannot gain entrance to the engine.