My cousin's boat with the same motor had water in the oil and it WAS the exhaust manifold. I replaced it and it's been water-free for 6+ years now. The water had to go past the pistons which isn't good, but surprisingly it still has perfect compression and runs great.
You can buy a ton of new parts for a cracked block.. Head gaskets... Manifolds... At the end of the day the block is still shot.. Pressure test the block before you spend a dime..
