Outboard engine cooling system question

I have a Mercury 3.3hp 2 stroke engine that fell into the water last
season. When I recovered it I disassembled it and cleaned or replaced
every part. I put everything back together, brought the engine
outside, put it in a barrel of water and started it up. It started up
fine after a few pulls and appeared to run great, until I noticed that
no water was being expelled from the tube leading to the powerhead.
The manual calls it the water pump indicator hole.
 I immediately stopped the engine of course to avoid overheating. I
then took apart the lower unit, replaced the water impellor and
gaskets. Upon starting the engine again, still no water was being
expelled.
   I verified that the water tube connecting the pump housing to the
powerhead was clear of debris. I verified that the water tube in the
shaft was properly seated in the pump housing when I reattached the
lower unit. I believe I installed the water impellor in the correct
orientation. The powerhead should be clear, I disablembled and cleaned
every component. And I made sure the water pump indicator hole was
clear.
  I can't for the life of me figure out what could be wrong with the
cooling system.  I made sure the water level in the barrel was well
above the water intake. When the engine was running the water tank was
bubbling up quite a bit ( no prop) so I assume the impellor was
working. Anyone have any ideas what could be wrong. Any guesses whould
be appreciated.

 Frank