I brought it home and replaced the impeller. Then I couldn't get it to pump water on muffs in my driveway either. After a lot of checking, head scratching, short runs and stops, and about 2 hours of screwing around, it was pumping warer with gusto. Here's what I learned:
It's hard to fit the lower unit in a barrel if the previous owner installed a hydrofoil.
It's hard to run it on muffs, I think because the pickup hole is pretty tiny. You need a lot of water pressure, a really good seal on the muffs, and the kind of muffs that feed water to both sides of the lower unit. I have very high pressure city water at my house. Other places it may just not be possible to muff this motor succesfully.
It takes a little time for the thermostat to open and start discharging water. Those are harrowing seconds when you're not sure if the impeller is working. I go by feel - if the cylinder head is too hot to touch for more than a few seconds, time to shut it down and cool off.
At idle, the thermostat will cycle the water discharge on and off - you can feel the cylinder head getting hotter and cooler as it flows water or doesn't. While it's under power and pushing a boat around, it discharges water continuously.
I had to pull my lower unit off recently for another reason and checked the impeller. It still looks fine, no sign of burning. So I must've gotten enough water to it to lubricate it, just not to pump properly.
So I think you'll find you're good to go after the barrel test.
