Micheal:
Just a note that on my old MD2B (sea water cooled also and previous to the Beta 38) the cooling circuit pump pulled the sea water from the transmission then into the engine - as I recall..
The cooling loop around the tranny corroded up until very little water (pencil lead size hole) want through - melted the lift muffler and pumped the cabin full of steam/exhaust etc... The owner was out with 11 on board at the time...
If your engine has the same cooling loop - I'm wondering of the steam is from reduced water flow to the engine - allowing the existing water to turn to steam.
My fix was muratic acid (pool supply) soak of the tranny cooling loop - to clear it up - and plumbing the sea water to be pumped to the engine first then the transmission.
Hope this helps.
Jay