I will check the pressure with a mechanical gauge to verify what it actually is. Thanks for the diagram

Was psi 18 at idle too ? Or just when motor exhibits the issues over 3k ? I later added this to my post, you prob missed it.

Dont you have another electric fuel pump before the water/fuel separator? I do, and needed to change it 2 weeks ago for same problem

Yes, it stays around 18 no matter what RPM

There is a mechanical lift pump attached to the water pump that supplies fuel from the tank to the fuel filter and electric pump. Does not have 2 electric pumps

Have you checked the oil level in the fuel pump?

I have not, if fuel was leaking into fuel pump, would that affect fuel psi at the rail? it would only be able to leak so much until that reservoir would be full of fuel correct?

15 is also a fuel filter, they need changed as well.

I was told 15 is only a fuel "dampener" to give more of a consistent fuel flow. I can replace that next or would it be possible to somehow bypass to test if its faulty/plugged? I guess I could test it with the one off my other engine to test too.

A fuel dampener is a regulator that’s not being used to adjust fuel psi.

#15 in below microfiche page is a fuel filter.
see:
https://www.mercruiserparts.com/bam/subassembly/31341/7595/110

#20 is a fuel dampener. It’s outlet is blocked off.