Steam is NOT okay!!! . . .
...assuming that you have a water cooled Yanmar, like I do in my H30, but a sea water cooled engine should be the same.A good Yanmar mechanic taught me that the mixing elbow should ALWAYS be cool enough to touch when the engine is running, even after several hours (I just did an all day trip, ten hours, and could still touch mine). If it is cool enough to touch, it certainly is not discharging any water hot enough to steam.If your exhaust hole is at the water line, touching the mixing elbow is a better way to check proper water flow than looking over the side to check water discharge. At idle, you can see the discharge, but if you are cruising, it is hard to tell (if the discharge is well above the waterline, it should be very easy to see).Most small diesels run at around 170 degrees. Steam is a sure sign that the engine is running too hat and not enough water is flowing through the heat exchanger (or block, if sea water cooled). You either have a clogged intake line, failed impeller, or severely clogged mixing elbow.The angle of the muffler shouldn't make any difference. Sea water is pumped through the muffler by the raw water impeller, which also creates the suction for intake. The raw water intake is on or near the center line (you should have to open the cock each time you sail---if you don't close it after every use, you are risking your boat) just aft of the engine. Water is not coming in through the muffler.Here in the Northwest, especially in the San Juan Islands, eel grass is a real problem. My raw water strainer contains at least some, and is often near full, every time I start my engine---which is why I ALWAYS check the strainer before starting the engine, and check the mixing elbow every hour or so during long motoring spells (learned this the hard way, after overheating).While cruising, always look for "steaming" sailboats--(usually charter folks/fools or beginners) who haven't learned of this local nuance.You will damage the engine if the problem is not addressed soon.