Ok so my 540 seems to be overheating then cooling off and then overheating again. This happens at any RPM on the hose or in the water. It starts at 130 and then about a minute later it climbs to 180 and then immediately goes right back down to 130. now I know its a water flow issue because I can see the steam start when the temp starts to go back down. Also the engine gets louder due to lack of water. I have already changed the thermostat and I am going to take it back out and punch out the center of it just to make sure that its not the issue. The impeller looks good as well. Idk if I have a oil thermostat but i'm thinking of anything that could restrict the water flow. I know its not the hose in the drive to because I have freshwater flush outs that by pass the drive and it still does the same thing.

are you using a marine t-stat or automotive?

I bought it from marine store so I'd assume that it was marine. its a 140 thermostat

Is there a crossover or a water pump on the front of the engine?

crossover pipe with a water line running form the crossover pipe up to the thermostat housing.

Idk if I have an oil thermostat but if I did could that cause the issue?

If the water pick up is on the out drive make sure the hose from the drive does not have a hole or is plug up.

it does it on the hose which has a flush out mounted inside of the bilge. that hose gets by passed completely. like I said it does it on the hose and and in the water. doesn't matter how you are running it Idling or up on plane

what size is the bypass hose?

Your new thermostat may be bad. I purchased a bad solenoids right out of the box and did not know it. After replacing everything, I still had a problem. After spending all the money to chase down my problem, it was a bad new solenoid right not of the box.