Xstream, I concur with Doug that the water line to the top of the shaft seal is probably for lubricating the "dripless seal" with water. When the boat is launched, it is helpful to bend back the elastic/rubber part slightly to "burp" the air out of the seal and fill it with water before starting the engine or at least before putting it in gear.
Yes, heads normally use outside water for flushing.
It is good to look at all the hoses around the engine and at the thru hulls to check the hose condition and to make sure they are properly clamped (two clamps per fitting). Make sure the clamps haven't loosened up, and look for cracked, bulging, cut, or burnt hoses. They often crack first at the fittings. You should also feel all the hoses to make sure they are still somewhat flexible and not cracked. If you are new at this and not sure what to look for, getting some help is money and/or time well spent. A cracked or disconnected hose can sink the boat while your are away.
While you are checking all the hose fittings, examine all the thru hull fittings, and turn each of the valves closed and open to make sure they work. It is best to have a soft, wooden, tapered plug available for each thru hull to hammer into the fitting if the valve or hose breaks off. Even better, have one stored at each fitting with a string tied to something nearby so you have it when you need at the location of the thru hull.
Also inspect the exhaust fittings where the engine exhaust mixes with outside water. The metal parts can erode at the corners and bends and cause an engine exhaust leak inside the boat.
Many hot water heaters have a hose running to and from the engine to circulate hot engine coolant through the how water heater (thru an heat exchanger). If the boat has been idle and at location that freezes, the lines for engine coolant and the potable water may be disconnected and the hot water heater drained and/or filled with antifreeze. If so, do not turn on the electricity to the hot water heater if there is no water in it; the electric heating element will burn out (put a piece of tape of something over the breaker as a warning).
Yes, normally the V-berth cushions match the rest of the boat. Maybe the originals are sitting in an attic somewhere or were damaged.
A diesel engine that is idling and not under load will take a long while to warm up, but it does not have to be hot to leave the dock. Just start it up a minute or two before you need it and once it is running smoothly and you can see cooling water coming out with the exhaust, you are ready to go.
ff if hit, especially as it ages. It should be bronze but the original is actually brass.