I would agree on the head or intake gasket failure.How much boost are you running?
Even though the oil is somewhat discolored still should change oil/filter.

Yes there are flappers.

There was no issue before the rebuild was done. I bought the boat and this was the second time I had it out. So Im leaning twardes a gasket or my oil cooler.

About 6 psi not sure. Im installing a boost/vac oil temp water pres. and a fuel pres. gauge. I am going to change the oil and filter then run the motor and change it agian. Then go run the boat and see if the gaskets worked.

I think your on the right course of action.i've got friends that run blower motors with high boost and they are always blowing head gaskets.you'll be fine.

I hydrolocked my 502 last week from a leaking exhaust riser.At the shop now but haven't heard yet what kind if any damage.

Damn that sucks.

Im hopping its mine not anything more than gaskets.

Hate to be the bearer, but i'd guess you will most likely need a new crank/rods if it truly hydrolocked. It can weaken the rod/crank to the point that it will run for awhile, then fail.

This is damage that can not usually be seen by the eye. Can't say it for 100% that it will happen to you, but I've heard this story before and Murphy's law prevails.

DaveO what is the chance that when the motor was put together no one checked to see if the head bolts ran thruogh any water passages on the heads and there for they didn't get sealed properly?

Compression check and leak down check should be the first order of business. If nothing is found (which more then likely there will be) you can pressure check the water system fairly easily. Water comes into the motor in one place and exits in 2. I used radiator pressure checker to test mine, worked well. If you test it right it will include everything from the sea pump to the inlet to the headers.

I would say 9 out of 10.

Thanks That could tell me more about my cooling.