You dodged a bullet.
You could have bent a piston due to the hydrolock or corroded some valves due to the sea water inside. I assume you have changed the oil a few times.
That genset originally had a poorly designed exhaust riser. If you had the old one that could have caused the problem, although I suspect it could still happen with the newly designed riser in the conditions you described. Slugs of water go over the exhaust hose high point, fill the lift muffler until the water is high enough to back into the engine.
Plugging the exhaust is a good solution.