It turns out it is actually a 1961 Merc700. I pulled the lower unit and opened the water pump housing. The impeller looked in fairly nice condition, but I had ordered a new one and will be replacing. Unfortunately when opening the housing the upper gasket broke in several places. I ordered a new one from oldmerc.com, but it turned out to be the wrong gasket for thei motor product code 27-32438(oldmerc I believe has mis information here). I believe the correct gasket is product code 27-858524. Does anyone know if this is the correct gasket?
Well I replaced the impeller and got everything back together... still no teletail. Stuck wire into teletail hole(about 1 1/2"), no luck. Water is spitting out exhaust but not tel tail hole. I did notice when putting the leg back on it appeared there where two holes in base of motor that could accept the water tube. I decided to fit the tube in same hole as I had removed it from. But.. it was not spitting water when I took it off maybe this was the issue. Is there anyway to check short of pulling the leg off again?
If water is spitting out the exhaust relief and the exhaust manifold cover isn't getting hot after a few minutes (or less) or running, you have the water tube in the right spot.
These older models with the telltale going thru the port rear side of the lower cowling, have a small passage in the exhaust manifold that leads to a smaller hole at the base of the powerhead. This lines up with the telltale hole. If there are salt or silt deposits in the manifold cover, this can prevent any water from getting out.
If you can't clear the blockage with a blast of compressed air, the only way to restore that telltale would be to pull the powerhead and manifold cover, and clean-out the deposits.
There's another way to get a telltale, you should have a 1/8" NPT slotted plug at the top of the powerhead on the manifold side. If you can get this plug out, you can install a 90-degree fitting and then run a telltale hose to the right side of the lower cowling, at the rear. Then devise a thru-fitting with a restrictor to give your telltale a nice spray.
The telltale fitting off a Johnrude 3-cyl or V4 might be a good fit for this application, you drill the hole and then the fitting snaps into the hole, held in place by built-in clips. See attached pics for a few examples.