Your condensation in the oil could possibly from running too cold and not getting the oil hot enough to evaporate the moisture in the motor. Some boats run very cold and never get the oil temp high enough to do this. Some boats can benefit from a thermostat style bypass system like rex marine sells. DO NOT INSTALL A THERMOSTAT INTO THE BLOCK WITHOUT A BYPASS!
A bypass thermostat system will help increase temperature in the block without interferring with water flow through the cooling system and headers.
Another thing you don't want to do is start closing the valve that supplies water to the engine from the pump. Here is the kit from rex.
http://shopping.rexmar.com/Merchant...&Product_Code=160100&Category_Code=thermokits
Unlikely that you ingested water throught exhaust valves. It is possible but probably would break something before getting that much water into the motor.
Do a compression test on each cylinder and check to see that they are all within an acceptable range. Also check the spark plugs for rust marks. Unlikely but worth checking.
Also make sure that your valve that controls water to the headers is functioning properly, that no water goes through the headers at idle. and that it comes in around 1500-2000 rpm.
Hope this helps.