123psi is okay IMO, check it occasionally (plug changes is a good time) to make sure it doesn't drop much under 120psi At least the pistons weren't scored, keep a close eye on them too when cleaning the RAVE valves. Over time as the rings, cylinder and pistons wear, compression will drop off. At some point combustion gas blowby becomes too great will begin to destroy the oil film providing lubrication between the piston, rings and cylinder.
Once the oil film begins to fail then rapid wear is the result and bits of alumunim begin shedding from the pistons and sticking to the cylinders then it's all down hill from there. This is normal and the goal is to catch it before mechanical failure occurs. Thus, keep an eye on your pistons and compression. Also make sure the engine's fuel system is working properly. If you begin to notice hesitation in the throttle response take care of that any fuel system problems right away b/c hesitation is often a result of running dangerously lean.
I forgot to mention, for the compression test do it before fogging the engine with storage oil b/c the presence of abnormal amounts of oil will produce an abnormally high reading and won't represent the condition of the engine accurately.
0.022 plug gap is good, I think I gap mine to 0.020
A wider gap is undesirable in a 2-stroke engine b/c plug fowling becomes a problem. A wider gap is used in lean running engines to make a fatter spark to ignite the leaner mixture. A 2-stroke is tuned on the rich side thus with the rich fuel and oil a wide gap will cause the plug to sort of short out b/c of being kinda wet with oil and fuel so misfiring becomes an issue.
I agree with Mr. Bill that too much water being injected into the expansion pipe cone will limit your top RPM result. The WB valve is supposed to restrict the quantity of water as exhaust box internal pressure increases.
So in your case I think you should check it to confirm it's in good shape and maybe follow Mr. Bills suggestions.
I don't run my boat at high throttle for long periods, I cruise it at around 5000~5200RPM, which seems to be the happy spot. I vary the throttle while cruising as well, 2-strokes don't like to run at a constant speed (they seem to experience more problems).
Edit: I should add, if you decide to pinch the tuned pipe water injection there is a risk you may overheat and damage the rubber coupling between the pipe and the waterbox, ther will be no cooling water being injected into to pipe. So this is only for a quick test b/c damage will occur quickly.
Sometimes even, the rubber coupling between the pipe and water box can become delaminated internally and partially block exhaust flow, this will also limit your top RPM.
, with the piston / cylinder clearance at 1mm. 
