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I think you are referring to the angular hole between the pump housing’s water tube grommet area and the cup surrounding the drive shaft. The purpose of that hole is to keep the cup filled with water. And the purpose of keeping the cup filled with water is to provide a water seal around the hole that the drive shaft passes through. If it were not for that water seal, exhaust gasses under slight pressure in the area could blow through the drive shaft hole, into the pump housing killing the pump prime.
With all that in mind, I just happen to have a 35hp plastic pump housing laying here. It does not have such a hole to provide a water seal. Instead, it has a "real" seal–a conventional lip type seal pressed into the pump housing. Also, I believe the drive shaft runs in a tube isolated from the exhaust, and vented / drained to the outside world.
So, I suppose your pump housing seal could be shot, allowing air from the outside world to enter the pump. Or maybe the pump housing is not sealed to the drive shaft isolation tube. BTW, that shaft seal is not perfect. When everything is correct, water still flows out the drain holes in the bottom of the isolation tube (located near the lower rubber motor mount). In fact, it is a surprising amount of water. It is a wonder to me how that much water gets past that seal. I must not be seeing the whole story.
Hope this helps. At least lots of food for thought.
EDIT: Now that I sat here and typed all those words, I just checked and the pump housing I’m holding in my hand is not for a 35hp. I don’t know what it fits. But anyhoo, you got a dose of education and something to consider as you look at your motor.