The first thing to understand is that the water pump on an engine is not a positive-displacement pump. It is not designed to produce high pressure, but rather to circulate high volume at low pressure in a closed system. The whole system is under pressure, controlled by the coolant cap. However, that pressure is due to the increasing temperature of the coolant—it has nothing to do with the water pump.
The water pump design on a waterboxer (1.9 and 2.1) moves coolant from ONE intake port (“low side”), where the entire impeller system is located. Here is a 2.1 style pump for reference:
2) Via a coolant pipe to the right side of the case to cool the other two cylinders.
Even on undamaged blocks, there is always a gap between the backside of impeller and the block. This part of the impeller is not responsible for any fluid flow at all. The coolant is being pumped into a common cavity located in the pump housing itself, as seen here:
The common cavity created by the volume of the cavity in the water pump and the space between the flat side of the impeller and engine block (damaged or not), all together, is the “high side.” The “low-to-high” section of the pump is located between the inlet port and the common cavity. The coolant simply flows out of this cavity in multiple directions.
Regarding the criticism that it should be fixed anyway because it simply does not look right, we have good reason to leave it alone. The only way to “fix” it is to weld it all up, then grind it all flat again. While we in fact do save money by not doing this, the reasons for not doing it is not simply monetary. In fact, the heat required during welding can end up warping the case, creating even more work, driving the prices of our engines even higher, and for no good reason in the first place.
And, what about these mysterious overheating issues blamed on this damage? The common complaint is that this only happens at idle, providing some proof to the concept that the damage creates “a leak between the high side and low side of the pump impeller,” and therefore only shows up at idle (low water pump speed). However, for the reasons stated above, no such leak is created by this damage, at slow or high water pump speeds. Overheating issues at idle that coincided with a damaged block are just that: coincidental. The overheating was happening due to some other issue. If only at idle that is usually an issue with the electric cooling fan. But, it could be something else, as well—like a stuck thermostat or some sort of blockage on the inlet side of the pump, not any issue with the outlet, or any other number of cooling system related issues.