When the engine stops and the boat still has some forward momentum, the stopped propeller blade will deflect water. The same will happen when the speed of the boat exceeds the thrust of the propeller. The spinning propeller is essentially being dragged through the water and is pushing water forward and outward as if it were a disk rather than a propeller. What you are seeing is not unusual. I see this alot when boat return to shore following a race. The boat has forward speed and the engine is shutting down. That's when you see a spurt of water come up at the transom.
Richen the high speed needle as Ron suggested. Sounds like you are lean. Your symptoms are common for a lean mixture - not enough fuel to get the engine through the load zone and onto plane. Once on plane and the engine is unloaded the mixture is sufficient to sustain running.