John , On some of the later model 500 efi motors, there is a manual fuel pump that runs off the sea water pump, it was supposed to solve the vapor lock problem that Merc. was having with some of the EFI motors , it was added to supply the fuel to the electric high pressure pump.
My 500 efi doesn't have one, but i did see some of the boats at the Daytona race back in april, did have these pumps, and was told that the reason was to stop the vapor lock problem.
Anyone else know of this??? Maybe i am mistaken! :confused:

Ron...

Found the cause!
 

O- ring in the top of the drive was cocked when service was done. Oil was comming out while running and blowing mist of oil and water on the transom and drive. It's OK now, thanks for the tips, I forgot to post the solution last year. Hope this may help someone. JB

How can you test the oil cooler? If it was leaking on a 454 mag, would the oil be more prominent out one exhaust or would the same amount of soot be comming out of both exhausts?

The oil cooler was removed and pressure tested with air to 100 psi. Then we put it in a bucket of water, no leaks.

As to where the oil would go....somewhere in the system and out the tail pipes.

I also had some oil on the other side of the transom. How about a loose oil plug on the other drive.