The arrow is the stand pipe. It extends in to the exhaust can. The easiest test first is to put it on the hose and disconnect the feed hose in the circle and make sure you have full water flow there. Just let it drain into the bilge.
This setup is the reason why you have to start the engine first before running the water. If you did not, there would be no back pressure and the can will fill with water eventually backing up the stand pipe and into the exhaust header, ultimately down an open exhaust valve...
The stand pipe is hollow with the water injected in into the case and having drain holes that feed back in in to the can. The last hose injects a stream of water into the can.
There are 2 Exhaust Temp sensors. One on the exit pipe of the can and one in the water box. If they go above 212, you alarm will sound. If there is not good water flow, it takes very little to throw that alarm.
If you get silt or sand in the system, it can plug the holes and no water.
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