does it matter where the dump line is located? like can i run it through the old holes where the exhaust goes through the transm?
Do a search on plumbing headers. You'll have a line, 5/8" - 3/4", coming from the T-stat housing

I have 2 lines coming from the Tstat. The first one is the dump line. It goes to the transom out a bulkhead fitting 5/8" line (I think).
The other line is for the water injected headers. If you run dry headers you won't need the second line.
The dump line will be above the waterline out the transom or side of the hull.