I think I have a leaking thermostat (or diaphragm). The throttle was stuck the other day and I thought it was the control cable. But once the cable was disconnected, it moved fine and the throttle mechanism was frozen. Behind the mechanism and inline with the main bolt was a washer (sort of a drag mechanism) and it was all rusted. While fooling with this and revving the engine high, water squirted out of a hole in the thermostat housing. This of course surprised me as I did not expect to see water coming out of the powerhead where it would get things salty and wet under the cowl.
You can see the hole in the center of the photo below, between the bottom two bolts on the thermostat housing. The exploded view drawing of these parts is also in a photo below. I think maybe the diaphragm is broken and letting water leak out. Any thoughts and anyone else experience this before? Diaphragm is part #18.
The working theory now is this diaphragm has been leaking for a while and thus the rusty throttle washer.
Drawing

Photo of thermostat housing

Thanks