I've rebuilt many of these engines and cooling systems and am presently rebuilding two 292 Interceptor marine engines. Your Sherwood pump should be the one with two outlets and one inlet. The inlet is the larger of the two orifices. when it is mounted correctly, the large orifice is at the bottom and hooks to the inlet hose from the thru hull or seacock. The other two orifices are hosed to the right and left engine inlets at the front of the engine. There should also be a small diameter hose on each side allowing bypass water to go to the exhaust manifolds. The water circulates through the block as if it were two individual four cylinder engines, going in at the front, up through the head and out at the thermostat or thermostats (depending if you have the original side draft Carter set up or a car manifold), Then out through each side to the exhaust manifolds.
From your description, it seems as if you may have the pump hooked up wrong. If you could email photos, I think I can get you on the right track.