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Peeing out the SIDE of the motor, "ALSO?" This is a 3 cylinder seventy with a clam cowl? It should only pee out the back.
If the impeller is more than two years old, it needs to be replaced, NOW. A lot of times the hub of the impeller will separate from the rubber. Sometimes they will even seem to pump okay at idle, when that happens but not at speed.
"Peeing out the side"……If there is a hole in the cooling system, it is possible for the water to dump out at that level and not make it to the top of the block, frying and locking the top cylinder only….
Third thing is that the early threes liked to cook the top cylinder from pre-ignition or detonation. I was once told this was because the cranks were ground wrong but since you time on #1, that never made sense to me. Anyway, they certainly cooked a lot of top cylinders, despite good oil and a good cooling system.
I would do a compression check on the motor, before I did anything else. You should see 130 psi or above on all three and within 10% of each other.
These are all just thoughts based on my interpretation of your description.
Long live American manufacturing!