It never ceases to amaze me how much I learn AFTER I have done the work. Where was boatdiesel.com when I needed them?
John, I finally get your point, and of course you are correct. If the pipe inside the water jacket were to burn through, then water would be introduced right at the manifold, which is ABOVE the valves! Too late now, I will trust that the 316L schedule 40 exhaust pipe, which you can see is 0.216" thick, will put up with the hot exhaust gasses inside and the salt water outside.
You can see what happened to the original cast iron unit:

It failed between the manifold and the water jacket and came off while the engine was running, and when I got home (on the other engine) I found the remnants hanging from the water hose -- no damage to the engine. Had to root around in the bilge until I found all the chunks of iron...
What I would do differently (for SDog):
=> Shorten the water jacket to just the end cap and the reducer, by taking out the 45 elbow and moving the cap to the other side of the 45 bend. Would then need to wrap the elbow.
=> Increase the size of the exhaust at the water bend: the engine installers used 3" all the way to the transom, but I could go to 4" where the water is added, and use 4" all the way out. Note that backpressure is not such a problem with four-strokes.
=> Add a surge pipe per Tony. I don't think I have ever seen one, but it is a good idea; if you get a slug of water coming up from the transom, it should take the momentum off of it.
=> Try 'tuning' out some of the exhaust noise. The surge pipe could also be a noise-canceling stub. I figure that for my engines it would need to be about 2' long.
Note that I use "long nuts" to bolt the water bend to the engine. This is because the original steel studs were a bit rusty, so I used the longer thread to get the best grip. Covering the entire stud prevents it from rusting above the nut, and makes it easier to get apart. I did this because I couldn't replace the studs with ss and put on bronze nuts, the preferred method.

"I remember when welfare was for poor people..."