Don't ya love it when a mystery is solved?
There is a simple solution to inserting the knotmeter impeller while the boat is in the water. We do it all the time. Have a large sponge handy, the red impeller within hand's reach, and remove the retainer pin on the red plug. Wiggle out the plug until it's loose but not out of the through hull fitting. It may leak a little at this point, but not as much at it's gonna!
My only worry at this point is if the plug is welded in the through hull by a million years of bottom paint. If it is, then you'll probably have to give it a good yank. I find that twisting it right and left while pulling works to free it.
When you pull the plug, you'll have a 1 1/2" hole in your hull gushing really cold Chesapeake water (if the boat's in the water). Immediately place the palm of your free hand over the hole and grab the impeller. In one quick motion, remove your palm and insert the impeller. Don't put your face directly over the hole unless you want to get wet. A fair amount of water will gush into the boat, but in reality, it will only be about a quart of water. Mop up the excess with the sponge.
The first few times that you do this, it can be disconcerting. But with practice, it gets easy and it can be a game to see how little water you let in the boat. If you are uneasy doing this in the winter, wait until you haul in the spring.
Tip#1: Lubricate the plug, the impeller, and impeller shaft with Vaseline. We even goop Vaseline on the impeller (the egg beater) to keep off marine growth. Works like a champ! I only had to clean the impeller once last season! We used to pull the impeller each weekend.
Tip #2: Replace the o rings that should be on the plug and impeller. If this is the first time that you're seeing them, I'm guessing that they are quite old.
Good Luck and Happy Holidays!