Well Ive been doing a TON of research(the small block 400 was just one idea ive seen and the closed loop cooling system totaly makes sence to me..) and Ive seen alot of different boats, setups, opinions, watched vidoes and read alot of forum posts from all over the country and canada. I just dont see many guys running the SB..
In short, most small block engines just do not have the torque handling strength that is ideal for a jet pump. The Chevy 400 has to be one of the worst Marine engines on the planet, cylinder wall and gasket integrity makes it an outright "wrong" block choice IMHO. You would be much better off (IMHO) building a stroked 350 (383). I have built a few with pretty impressive result, but will still get it's ass handed to it by a properly built, but still stock 454.
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I know a small block can be built up for cheaper than a BB and the power: weight ratio with a badass pump setup, to me, would run laps around a BB. I love the BBC(I built one myself in my pickup[468]) so im already biased to the BB but the numbers just make sence to run a SB...
Except the small block simply cannot generate the torque up top like a Rat, they need to spin a gazillion RPM which causes the impeller to be cut down to a dinner plate and the performance of the pump take the big poo poo.
Now the closed loop cooling system...why not just run the same setup as a pickup truck? It'll keep all the sand out of the water ports, theres no fuckin with the goddamn water valves(no half turn this, half turn that BS), and you can have the motor run at a consistent temp, just like a car. Id run a super cool tstat maybe in the 160 degree range.
Except (and this is your argument) you just eliminated any weight savings by going small block, the equipment necessary to go to closed cooling weighs in at about 150 #, you will need all the pulleys and water pump on the front of the engine, the heat exchanger, which weighs about 80 pounds full of water, all the related stat housings, filler neck and large hoses, plus you will still have to regulate the flow on the heat exchanger... It is done all the time, just built one from scratch about four months ago...
Might put a couple 1/8" in the face of the stat to get a little more flow for those long poker runs...if you still wanted to run wet stacks, still use the tap off the pump housing, run your plumbing accordingly, but place a gate between the housing and headers.
Don't need holes in the stats...
Also with a closed loop system the chance over over pressuring the water system by having a valvhe open too far or the other being closed too much and blowing a head gasket reduces drastically..
This is true, but when they overheat, it is way more dramatic. Not to mention dangerous (200°F+ water under 15 pounds of pressure)...
I dont actually own a boat myself but Im really interested in seeing what other people have to say about these theories...great numbers/less weight and worry free/consistant cooling...doesn't seem like rocket science lol I look forward to the comments 
sent from my smarter than me phone
Other than the lack luster torque curve of a small block, I would say you are on to something.... BTW, Aluminum whitewater fishing boats have been doing this for decades, typically with a Kodiak or a Hamilton jet unit. They work killer and you can run a heater core like from a school bus under the dash to stay nice and toasty while fishing in the winter time when it's 40°F outside and raining.

Talking about these badboys..
GT