So you were given a motor that somebody gave up on ?---Does spark jump a gap of 5/16" or more , yes or no?------Perhaps wires from magneto plate to the coils are swapped.-----This should be an easy fix.
On many motors the tell tale water does NOT go through the block.-----Not so on this motor.----Something simple is being overlooked.----Post picture of how you are testing this motor.
Key has to be " on " to get spark.----So remove one of the black wires from the key switch.----Test for spark.------I would pull the flywheel to inspect the coils , clean and set breaker points to 0.020"
If the copper tube was stuck in the pump housing you have to remove it.----First install the copper tube into the exhaust housing.----Then install the lower unit.
Little cover ( 3 screws ) on top of cylinder head.----Those thermostats are often stuck open.----If it tests good why replace it ?----Yest run in a bucket with water 8" above impeller.