Well, not being familiar with this particular engine or pump, I'll take a guess and say that somehow the inlet and output of the pump have been interchanged.
If the cam inside of the pump can be positioned at the top or bottom, that sounds like the pump can be configured to pump in either direction. I would agree with Ken13559 that it may be in the wrong position for this particular engine.
I have never seen a rubber vane pump that needs priming if the impeller is in good shape. These pumps self-prime.
A last note- if the cam in the pump is in the wrong position causing the pump to pump from the output to the input, then I think it could pull air from the exhaust through the heat exchanger and push it into the strainer and out the thru-hull. This would coincide with your observed scenario. Also, if that is the case, that means that the impeller has been run dry without water lubrication and is probably toast. When you open the pump to check the cam position, be sure to check the condition of the impeller.