76bayflite, I'm very interested in what you discover!
I'm trying to diagnose (what I think is) the same problem in my 1978 Mercruiser 120.
I got the boat during summer 2013 and the TEMP idiot light was lit at some brightness level during most of a boat cruise (even during a slow, 1500 RPM speed), but the engine was just warm, not terribly hot to the touch.
I started by removing the thermostat. It ran with the light much dimmer, but it was still on during a cruise.
Then, I replaced the thermostat. It ran with the TEMP light on at varying brightnesses during a cruise.
I just installed a temperature gauge in place of the TEMP light, so I'll have a better read on the actual temperature, when I finally get the boat in the water this season.
In the fall, Rich suggested that it could be rusted water channels in the exhaust elbow.
Thus far, I've not removed it to look.
The Mercruiser manual suggests you have to disassemble lots of things (throttle cable, fuel line, and all hoses in the area) to get the elbow off.
Is that true?
see page 591 here
http://boatinfo.no/lib/mercruiser/manuals/mercruiser3.html#/590I'll stay tuned to this thread!
Eric