Re: Volvo Penta AQ170 overheats
ANY air leaks on the suction side will reduce the ability to get good flow to the engine. Like the Captain said, that water neck fitting is a common bad actor. It's best to check all the lines to look for cracked, hoses or anything that can allow air to enter on the suction side. You have two water pumps. One is the rubber impeller type raw water pump and the other is the circulation pump. Is the circ pump leaking through the weep hole? If so, there's a good chance the bushings or bearings are shot.
Give us a little better description of the leak by the transom. Is it inside or outside the boat? If outside, sounds like the exhaust boot. If it's the boot, shouldn't have an effect on cooling but should be replaced anyway. Pictures help.
Might want to pull the thermostat and check it in a pan of hot water to see when it opens.
Edit: Just thought of something else. The strainer is on the suction side and can leak as well. The way I checked mine was to add a garden hose fitting just before the strainer. You can then pressurize the suction side, especially the strainer, to look for leaks.
First pic is of the "t" fitting and second is of the strainer leaking. Mine is a 4 cylinder but these should help give you the main idea.
