Positioning Exhaust

I'm building a custom 14ft runabout powered by a 1995 tiger shark Monte Carlo motor and jet pump. I need to drill a hole in the transom for the exhaust and I want to make sure I don't screw or up. Where should I locate the hole relative to the waterline? Above? Below? In the middle? The engine exhaust goes through a water box, which is fed by cooling water. I suppose this is to serve as a muffler. The engine exhaust and cooling water exit through the exhaust hole together. I was going to put it right about on the wateterline, half submerged. Is that the right thing to do? I guess it will be completely out of the water when the boat is planing. Does it really matter?

 

I would put it well above the waterline unless the exhaust has some means like a siphon or water trap that prevents water entering the manifold. And even above the waterline I would install a thru hull with a rubber flap.

 

Found a few pictures of the same model jet ski from which I scavenged my propulsion plant.
Here's a link to the pwctoday thread with the pictures:
http://www.pwctoday.com/showthread.php?t=279620

It looks like the exhaust is positioned as low as I can go. It's slightly above the jet nozzle only because of the deadrise angle. There's a big rubber tube connecting the water is to the exhaust penetration. I guess that would serve to prevent backflow into the waterbox? I'm still not sure how this waterbox is supposed to work...