Actually I'm not really surprised as I've personally noticed no water supply to the impeller on the B-3's in the past when someone else has installed the flushing device (muffs) for me and I have read many times on the forums that members have had a difficult time with getting water to the impeller especially after doing a new impeller on B-3's mostly. Some members have had to "prime" the water hose between the transom and impeller housing. My fix to get water to the impeller was to remove the flushing device, trim the drive up and down 2 times to try and help purge any possible air in the water passage ways/hoses, then with the drive down, I made sure the flushing attachment was installed correctly....< Worked every single time.
B-1's that have dual water pick-ups (lower and side pick-ups) needs to have the lower pick-up hole blocked with duck tape, etc. or you'll suck air shortening the impellers life dramatically.
One of the most important things you need to ensure is done correctly in order to run an engine on the flushing device is to ensure the flushing attachments are installed as tightly as you can get them hugging the lower unit pick-up holes....The tighter the better. Also be sure to align the water hose fitting to the "center" of the intake pick-up holes for best water saturation throughout the drives water passages.
If the flushers are loose around the intake holes then just as you tested/experienced, the water won't be able to build up through the drive even if the impeller is trying to suck the water up due to the water volume just won't be there enough for the impeller suck it up. The impeller would only be sucking the air between the drive and pump. I've even had this same situation recently with a loose fitting flushing attachment on an Alpha Gen 2 drive. The impeller just wouldn't push the water to the engine until I tightened up the flushing attachment.
For the best tight fit, I recommend you buy quicksilver flushing kit part number 44357Q2. This design will let you push together a
really tight fit on both sides of the drive giving you the most water available.
Don't be afraid to run the engine at home as long as you know you have a good tight fit and good enough water pressure which it looks like you do since you were able to squeeze together your flushing device and see water flowing up through the drive housing and out.
A quick tip for you when running the engine any time (home or lake) once you get to know your boat/impeller housing design/location, if you are able to carefully reach the backside of the impeller housing without touching the belt spinning, put your hand/fingers on both the sides and rear of the housing to see if you feel any heat at all...If you do then you are sucking air and need to shut it down and figure out why. The housing should be as cold as the water you are using while running.
Hope this helps get over the fear, good luck.
44357Q2,