What kind of power are you running to that motor? Sounds like you may be running WAY too much current... (too many cells or the motor is bound up... not getting up the rpm its supposed to.)

The cooling should be provided with a 1/8 id aluminum tube coil wound around the motor. (wind it a bit tight.. so you have to spring the coils out to shove the motor in.) There will be a water pickup line that has a metal tube beveled to face a bit into the direction the boat travels, and the water return lne should have its end beveled to face to the rear.

Too large of a prop... too many cells in the battery... binding in the drive line. Those are the places I'd be looking first.

At this point... you've probably already ruined that motor.