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That water pump was first used on the 1980 model 7.5 HP 2 stroke.-----There is nothing wrong with the design of the pump.----Find the real issue here.----Water in your test bucket is 20 cm above the impeller ?
Plugs do not foul these days on a 4 stroke.-----Fix what is wrong with the Honda !----Thermostat in place and working ?----Proper voltage going to the plugs on this " older " Honda ??
It is NOT a valve issue.------Load test the battery.-----Take starter apart for inspection.-----Drain / change gear oil.-----Install new water pump impeller before your first expedition.
Good compression would show about 130 on my gauge.----So you have a bad guage or a motor that needs work.----Pull bypass covers on the 100 PSI cylinders.----Look at pistons / rings.
There is usually a bit of air above the oil.-----It gets blended in with the oil.------The tiny bubbles that make the oil look " milky "------Let that oil sit for a week or so and see what happens.