Hi David: I know nothing about engines. It's nearly impossible to find anyone who will work on a 78' engine (so far) Here is what the 2 people I've talked to have said (so far)
Mechanic 1
My apologies for not being able to get your engine running again. It may be that you'll need someone more specialized with your particular problem. The main issue I see is that seawater did get into your exhaust manifold and most likely you cylinders which was noticeable when we tried to start it. It's typically known as "Hydrolock" where the engine is trying to compress seawater and has difficulty turning over, I replaced the worn and broken exhaust components. They may have been instrumental in the water entering. Normally the combustion back pressure pushes the seawater out of the boat but by having a crack in the pipe it allowed water to back flow in the opposite direction. I tried bleeding the fuel system multiple time thinking it might be air in the fuel system, but it wasn't effective. When I had the exhaust pipe off I could visually see water droplet inside of the manifold which may be causing a valve to stick open, and not allowing compression. Another possibility could be the injector pump cutoff switch is cutting off fuel, but I didn't make much progress diagnosing this.
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Mechanic 2
Here is what 2nd guy he has already pulled a lot of pieces and parts off and put special oil (that sat for a week) and it didn't work.
Option 1
Get head gaskets, misc gaskets, valve parts take engine out, rip out galley, build plywood floor, take head off, see if can get loose inside cylinder with penetrate with oil, get loose floating
Cost minus wood work of rebuilding galley 40 hours + parts $6000 not including rebuilding galley. Includes $1500 valve job Bring torch in, heat everything up probably 50/50 on working
I’d have to do the demo work on the galley beautiful woodwork that I spent months on, then redo it.
Option 2 Just as risky, me find the same engine buy from reputable company get 30-day guarantee if it doesn’t work, will just be out the cost of shipping. Make sure it’s a VDrive
Eric called someone and they made an adaptor plate for a different V drive so it won’t work for my boat, I could find an adaptor plate, just need engine not a gear box
Option 3
Reach out to Westerbeak to see if they have: 40B4 V drive 44 horsepower 4 cyl if they have 30B3 it would be about $2-3K cheaper, too short is okay, too tall won’t work
Same engine make sure V drive
He said to buy a brand-new engine, it would cost around $25K