I have an old 160 hp Mercuiser (1969). Straight six, 250 ci, predecessor to the 165 which I think came about in 1970 or so. Basically the same motor, though. I believe that the 292 was used in the Mercruiser 200, and only for a few years early on. I saw one in a boat once - it had two single barrel carbs.
I thought about putting a 292 in my boat once. My conclusion was that it would not fit because it is taller and my boat has very little height clearance in the engine bay. Secondly, since the 292 is taller in the block, the exhaust elbow is higher in the air, so you need a longer bellows hose, or some type of adapter.
Most of the older boats had a raw water cooling system. Water is pumped up through the drive, into the engine (mine in a fitting at the thermostat), though the engine, then through the manifold, dumped into the exhaust stream at the riser elbow. Then out through the drive, through the prop.
Problems occur when the manifold rots and sea water gets into the head. Aftermarket replacement manifolds are available. Frequent flushing and winterizing with antifreeze prolongs the life.
