The Bassett "T" is a small on/off regulator, it keeps water out of the exhaust below about 1500-1800 RPM, that's normal. In the -8 fitting on the "spider" (that's the small lines that screw in the headers themselves) there is a double male that connects it to the feed hose. That fitting, if correct, has a divider in the center, and that divider has a hole from .080" to .120" diameter to regulate the amount of flow into the "spider". It sounds as if you either don't have that proper fitting, or the hole is too large. These exist because there is a great deal of difference in the pump pressure and block pressure found in jet boats. What was fine with your near stock engine will be too large when the new engine spins the pump faster and to a higher pressure.
Always replace the calibrated spring and ball in the beginning of every season too, they rust and corrode. Timinator