Greg, I think you're understanding fine. My assessment of the drawing of the existing exhaust system is it is exactly the way it should be with the possible improvement of locating the water injection a little lower after the hump.
Here is an article from Good Old Boat discussing waterlift exhaust systems with an excellent drawing near the end:
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Neil
1977 Catalina 30
San Pedro, California
prior boats 1987 Westsail 32, 1970 Catalina 22
Had my hands in a few others
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