Water in oil.?????

[81 Checkmate]

The 81 Checkmate V-8 305. Replaced cam in other thread. Ran great till i messed with the lower shift cable adjustment. I did it in the driveway on muffs just like that artical on here sugested.Thought i had it right but when you do things on muffs it always is differnt in the water. Ok put bost in sat still had the shifter issues as my adjustment did not work. Still ran the bost for a test. Ran fine for about an hour then took the dock to park. went out on the pontoon rest of day. Next moring going to take boat out for a test and do alittle fishing. started boat on first click set about 8 min at idle while loading stuff put into rev engine quit started back got into rev then went to put into forward engine quit ( i know lower shift cable ) well the boat just cranked no fire, lift the hood looked at shift interrupter and it was on the lobe. Ok thats why it wont start. Moved shifter back and forth and got it set in the middle. Started boat firerd for sec and then it made a noise and a puff of white smoke from in between the motor and transom. the boat had lock up. (Bad start to the Day) Would not turn over, its locked up. So loaded back on trailer took home. puled the plugs and water in every hole. Hydro Locked, turned over a few time to flush all the water. Did a compression test on all cylinders. all at 150 psi or better. We have better compresion than before the cam change. Looked at the dipstick and no oil present. cleaned all the plugs put back in and it firerd right up, shut it down and looked at dip stick and water in oil. Changed oil and filter and let run for 10 min and there is no water back in the oil looked nice and clean. My question is how did the water get into the oil. The exsaust pipe comes out right under the Gimble and does not go down into the bottom of the out drive and the boat does sit vaery low in the water. Could it have suck water back into the cylinders from when it went bang. I am thinking that when i tried to start it it was partial in gear (Rev) maybe. Dont Know. Any advise would greatly be apreciated. Thanks All