What are these valves for?
They are located under exhaust manifolds.

Looks to be drains for the exhaust water jackets.
But that is NOT a factory setup.

With both closed motor codes low water pressure at WOT.
With both open motor overheats to 200 but water pressure is good
1 open and 1 closed motor runs at 174 with good pressure.
Would like to know why.

You are going to have to chase where they go a bit. They could be a "redneck engineered" way of reducing water pressure. We use valves like that on BBC jet boats sometimes to run the headers dry or wet at times.
But you always would want to have everything wet on that motor, no exceptions.
Are your exhaust temperatures the same, always? Do both manifolds feel the same temperature? (Hint, you can check with a laser temp gun, invaluable tool to have.)

That also doesn't look like factory exhaust. Please post some more pictures.
And see if you can find where the bottom of those drain lines go to.
Also, don't trust the Open/Closed position on those valves. They could be exact opposite of what you expect. Take a hose off each one and inspect.

I am guessing you have Dana exhaust. I have Dana too and mine are used as drains or typical flow. I dont understand why yours are set up like tees???

How old is the impeller?

Impeller is new.
Had heads redone. Problem occurred after motor was reinstalled.
Not sure how the valves were set prior.

They may have been both 1/2 open.

Disconnect the bow side and see what happens. That is the discharge for draining on my engines...