Does it cut-out just as the water starts to squirt from the tell-tale? - if it does, the water/exhaust seperator plate has burnt through allowing water into the pots. This is quite common on mercs, i've had two do it in the past. its under the largish rectangular cover 6/8 bolts on r/h side.(i think!) trying to repair plate is futile - replace it with new.
An easy test is to remove fuel line and empty carb bowls and filter bowl, remove plugs and spin over on starter, till water starts pumping round, check if any liquid is being bown out of plug holes, if there is, check if its water, if it is, then plate has gone.
steve, November 2008