Hoooookie dooookie!!!
My backside just slammed shut reading alla yer cuddlefish stories. Even when I worked the Bering Sea..... no cuddling lest one got knifed!
OG here it is, you're the second reason my senses slammed me shut!!
First off, the U/W exhaust is ok..... unless it isn't water cooled while exiting the exhaust manifold.... trying to burn your boat down??
Second, if indeed you did not water cool your exhaust,you will catch fire.... or sink from that huge melted hole in whatever exhaust extensions you've used.
Third, dry stacking exhaust is acceptable, so long as it isn't stacked underwater, AND that the dry stack is wrapped in heat treated fiberglass cloth formerly asbestos- don't use the latter or your lungs will become useless.
Fourth, you can install a straight muffler for a dry stacked system.
BTW- dry stacked is the best exhaust system for any boat because there is no contact with water, there-by giving you 100 times the life of the exhaust system. The reason they aren't used on yachts is.... prima donnas don't like noise or raining smoke. Usually only commercial boats are dry stacked.
Fifth, plenty of IDI's of both 6.9 and 7.3 in boats, again, usually commercial.
Sixth, as mentioned, if your prop is too big, gotta circumcise that thing so you don't lug the engine.
Seventh, turbo and pyro as suggested, add head bolts etc...
Eighth, no... boats are not always at 100% unless you throttle it to such position.... never a good idea for any engine. I'd guess the IDI's are 90%er's.... that is, only drive the boat at cruising or working rpm 90% of the time. The other 10% is split at 5% for almost full throttle or 80% of maximum throttle/HP and 5% at 100% or full throttle 100%/HP.
Ninth, you can use oil as a fuel without any conversions on any mechanical engine, it is the computerized engines that will give you fits, due to the cetane sensors in the fuel system. They'll wreak havoc on everything controlled by computer.
Using oil as a fuel will give you dirtier exhaust... some of the fellas around here would like the extra smoke....the trick is to clean up the oil of all metals and any soot you can squeeze out of it. Both are abrasives. Magnets on very low micron filters will help immensely on pre-heated oil. Once the oil is filtered, it must be cut by anywhere from 66% to 75% minimum with diesel. On your boat, you probably have a couple hundred gallons of fuel capacity, even if you only used 40% waste oil, on a 200 gallon fuel fill cut 40% will save you $320.00 for every 200G fill up at today's prices. Always start off slow or with much lower mix ratio's, you never know exactly how healthy your system is to begin with, especially judging from the apparent lack of experience with both these engines and marine workings in general. Chances are, your local air quality guy will come looking for you with these mixes too.
Tenth, Change the oil a lot in a boat. It is typically recommended every 300 hours or once a year regardless of the hours put on the engine. Oil in boats is subject to a lot of moisture, moisture exacerbates oil oxidation as well as the obvious wetness. If you get the turbo, this is even more true than the more true than evereverever....period.
Eleventh, Since a boat's engine is supposed to produce a lot of low end torque, a blower may be better suited for your needs than a turbo. You are a fisher dragging and hauling net, it is all done at low RPM, where you need the torque. Turbos do not kick in until 1200-1500rpm's, blowers work from 650-1200RPM's. This is where you want your torque curves. I'm also assuming you don't have a planing hull.... no need for a turbo.... everneverevernevernerver! It will never kick in, until you are empty of fuel and no fish aboard, going down wind and swell... THEN! You might experience some turbo boost.
My biggest concern for you right now is your exhaust system. Just based on your limited commentary.... I'm afraid for you because of potential fire or sinking.
Lastly, I'm basing my guesstimates on several factors, you have a shaft drive hooked to a Borg-Warner 1.9 or 2.1:1 transmission, not an out drive, you have a non-planing hull, and you will carry a lot of weight when successful- preventing planing anyway.
Only you can know what is good for your boat. Since this is a truck forum, these fellas will know little about what makes the boat tick, but will know a whole tunna stuff about the engines themselves....most of which will not apply performance wise to boats. Don't get me wrong, these guys will advise/fix your broken engine, they know 'em in-n-out.... but truck v. boat..... whooooole uther animal!
Part of the reason for this is, they're used to a transmission in very low gear to get going, in a boat, you're in top gear from start to finish.... the torque and rpm curves are waaaay different. Chances are, your HP rating is only 170 HP. Imagine towing a car trailer with a semi-truck on it in a 1984 6.9l pick up, starting in third gear.... this is what is expected of your boat.
Not trying to dampen your performance requests, you can upgrade performance, but, gotta start from a real point for real success.
If you were a "sport" fishing boat around 26'-28' or so, center console, then I'd say best speed with that engine, turbo's, an older Mercruiser C-Drive with a lower end duo-prop conversion is around 14-18 knots tops!(14-18knots = 16.1-20.7 MPH)
I'm guessing your boat is more like 32'-36' in length, soft chine, transmissioned with 1.5 or 1.75" shaft and 16" propeller pitched to 14", you have a small house on her and a bunk or two with small head, stove and refer. Nothing go-fast about whatcha got....no matter the engine.
The good thing about the 6.9l N/A is, if you drive her gentle, she will sip fuel.
Use the tuning tips on this site between glow plugs and injector performance and you will make money, not buy fuel.
Forget about the turbo, make some good money and buy a newer used Volvo 41G 200HP marine, a nice little Cummins BT210 or an older 3108 Cat 210HP. All three very reliable fuel sipping getcha home marine engines. The Cat may be a little big to fit in your current hole though...it is an 8 cyl engine waaay bigger than the 6.9. All three can fit up to your Borg-Warner.
This is not good for anyone on a boat. Doing a tear down at sea on a small vessel(smaller than 50') is not a pleasant task... been there done that...doing a rebuild is out of the question on a vessel smaller than 100'(nowhere to store spare blocks-n-heads). Now you know just one of the reasons sailors swear more than most. 
OL!!! Who knows, maybe it's because everyone likes a train wreck and they've come to see my inanities?!!! 
