the priming thing happened with mine when i was doing my first impeller change after buying the boat. the PO didn't use it much in the 5 years he owned it so must have never changed it, and the old one wore a ring where it rides against the pump housing. i see you already installed the plate that goes between the two halves of the housing to fix the issue when you install a new impeller.
call Steve Buttrick at C&S Marine Pumps. i got my impeller from him, and when i went to install it he had included a note in the box that stated this exact issue being common for the Merc motors. super good guy to work with a he was a fraction of the cost of others that i was shopping around. i bet he can talk through what it would take to get yours fixed.
C & S Marine Pumps Inc
149 s Highway 97
Cantonment , Florida 32533
Cell (850) 380-1731