2004 5.7 Mercruiser Mag MPI won't fire, at my wits end.

In need of some help figuring this out. My 2004 Mercruiser 5.7 Mag MPI cranks but won't fire. It cranks and will try to catch a couple of times but won't actually run. When I ground a plug on the block, it gets strong spark when it tries to catch, but not when it is just cranking on the starter.

Now for the back story; I picked up a 2004 Chaparral 256ssi a couple of weeks ago. The survey looked good, and the engine survey (separate guy) showed good compression and no major issues. Engine was replaced a few years back (either 200 or 400 hours on it, can't remember). I took it out for my first trip and it was running great, came up on plane, handled amazing. After an hour or two I slowed down to pass a fisherman and not hit him with my wake, then she wouldn't come back up to speed, sounded like the engine was bogged down. I stopped for lunch, anchored, and it refused to fire back up. My first trip out on my boat and I had to get towed back in (I made sure I had Sea-Tow set up before I went out thankfully).

Turns out that the hose clamp on the water pump discharge wasn't on the hose and the hose itself wasn't fully on the fitting, letting water leak into the engine compartment. The bilge pump float switch also wasn't working (the surveyor let me know but I had completely forgotten about that). Best guess, water got as high as the batteries and grounded out the system. Engine hatch wouldn't open (connector had fallen out), so I had to use the 4" access port to look once I realized the boat was sitting a little low in the back end. I could see water, but it wasn't near the intake (thank goodness), and looked to be a little over half way up the engine (so most likely didn't submerge the alternator). I turned on the bilge pump and emptied it all the way out. The Electronics (VHF radio, depth finder) worked all the way in.

Got her home, got into the engine compartment, made sure everything was dried out, and let the troubleshooting begin.
-Checked oil, was at the same level as the pictures in the engine survey. Tried to start, cranked, then wouldn't.
-Replaced the starter (starter bindex was stuck all the way out and covered in flash rust). Starter flywheel looked good. Wouldn't fire up. Checked starter fuse, was good.
-Pulled all the plugs one at a time, cleaned them, checked for moisture in the cylinder and spark. No moisture in any cylinder, but no spark unless the engine was trying to catch (quick jump in RPM and sounded like she was trying to start but died back down).
-Replaced both batteries. Hypothesis was that they got covered with water, system got grounded, couldn't put enough electricity to where it needed to go, boom, no spark unless the alternator tried to take over. Same thing.
-Had already inspected the distributor cap for carbon/cracks but didn't see anything. Replaced cap and rotor anyways (saved the old because why not). Same thing.
-Verified same voltage at rotor as was showing on the battery.
-Just changed the oil (looks a little milky, hoping it wasn't already contaminated when I bought it) and fuel/water separator (checked fuel for water, didn't see any). About to try again and then check compression again, but doubt it is that since I was already having trouble with the spark.

I've got over 20 years of mechanical experience, have worked on a ton of cars and am comfortable working on engines, but I have a sneaking suspicion this is something very simple. Have checked all the breakers under the dash, the triple pack of fuses, red reset breakers on the engine, and made sure I have enough voltage to the distributor cap but am about to take off my "mechanic" hat and throw on my "parts changer" hat to just start throwing parts at it. The marine mechanics by me are all backed up a couple of weeks otherwise she would already be in the shop.

Thanks in advance for any help.

If it's injected, you have confirmed that both fuel pumps are working properly and that there is no water in the fuel, yes?

[h=2]2004 Mercruiser 5.7 Mag MPI cranks but won't fire - sometimes means the Run-Off switch on the helm/throttle is set to Off.[/h]

Thanks to both. After changing the oil and the fuel/water separator, she fired up. Took a few cranks but she worked. I pulled some fuel (and took a sample directly from the old separator) but didn't see any free standing water, even after letting it sit. Separately, whoever put the filters on at the shop needs a swift kick to the shin, those things were on so tight they both got destroyed when I pulled them.

Single fuel pump and I could smell fuel from the cylinders, could also hear the pump kick on when I turned the key to on.

Sab, are you talking about the lanyard kill switch? Checked that (won't crank if switched off).

Ran great yesterday, but when I checked the engine compartment out in open water, the water hose was leaking right on to the serpentine belt. On to the next adventure, I guess!

2004 5.7 Mag
Ya all I know is I tell my family check the kill switch first if it don't start.

Filters - The first oil filter I had had with the boat I had to cut off w/ a Sawsall. You have the remote oil filter. I remember BTDoctor way back recommend a strap wrench and i have it handy.. How an oil filter seals against a flat painted service is beyond me. Was that oil filter after market? I don't know why but OEM filters work the best, don't leak, and don't need to be supper tight. Also, for the upside down fuel filter I wrote below the filter "loosen CCW" because I don't want to be confused -I learned to make items idiot proof. good luck