They are not fuel injected....

Not original engines? I could be wrong but I thought you have merc 502s,,if that is correct then they are not original,,only EFI back in 1998

I think in 1999. All the others I looked at were carbs also

I dont know about that,we have a 98 32 with 502s and a 98 35 with 502s in our lake and both are EFI,
just did a quick search at a couple of 98s and both are EFI as well,I thought 1995 was when they switched to EFI,

http://www.yachtworld.com/boats/1998...s#.VFLFyzTF_To

http://www.yachtworld.com/boats/1998...s#.VFLGETTF_To

i kind of skipped to the end here and didn't read the hole deal BUT i would not be concerned if the oil at the bottom of the pan or on the bottom of the dip stick is good (golden, no milk) then you are pretty much in the clear. almost every boat gets camel cum in the top end or on the valve train in these conditions. it is extremely cold out with 40 something water temps, that equals camel cum in the top end. pull your plugs and look for traces of water, if non in the cylinder then you are looking pretty good. that's not to say you're in the clear but i would stop losing sleep over it. if your compression test and leak down look good then i wouldn't go any further. i've had camel cum in the top ends of every motor that i've owned (i don't run thermostats), never really had a problem that stemmed from that.

Id run the $hit out of it, maybe its not as bad as you think. If theres carbon build up on the valves leakdown isn`t going to be great. The goo could be condensation like Cig94 said

Those are not the 500hps.

Boatnt. look at the one from Finland . Same setup I have

I look at it this way. The boat sat..... Maybe sat... Who knows. Either way valve springs are shot. I had not valve cover milk, but milky oil. I did change oil twice after heat cycle. Oil was clear after a good ass whooping. Good news guess. But leak down sucks. I did run the **** out of it and leak down came after beating. I didn't pressurize motor or pipes. But I think I might as well freshen this ***** up anyway. It's only money

16 year old 500 hp's, I would have been banking on a top end job regardless. The bottom ends are pretty damn tough on these things, I doubt what you have going on is catastrophic.