My setup has only a fuel supply line going into part 33, the bleeder knob. As shown in the diagram
If that knob is open (CCW) and the fuel pump is running, nothing comes out of it.
I would expect to get either air, bubbly fuel, or fuel, or some combination of those.
I don't have a return line coming out of the bleeder assemply as shown in the photo 2 which is not my boat
and what which I believe is what you are describing
That's the correct part manual, the Fuel Camshaft Group. Part 34 is the fuel inlet joint and part 1 is the injector pump.
Your
expectation of air, bubbly fuel or fuel or some combination is just incorrect, that's all. It appears from further inspection of the diagram (and thanks for that) that the infamous Knurled Knob, part 33, bleed valve assembly, introduces incoming fuel to the injector pump. I was wrong about the fuel return part of what I said, and in fact have been wrong about this for decades!

Functionally then I can't answer specifically how it works. All I know is that nothing should ever come out anywhere near that assembly when you open the nut/Knurled Knob. Somehow it introduces the fuel and air into the injector pump but if you follow the Bleeding 101 steps using the knurled knob and the electric fuel pump you will get all the air out of the system.
Perhaps someone who is more into the guts of the details of this assembly would chime and and explain it to and for us.
That's one of the beauties of this engine: you don't have to slop any fuel all over your engine to bleed it, it is the simplest and cleanest engine to bleed (other than 100% self-bleeding ones of course!). I've written this before: when I first got our boat 25 years ago, I was afraid to change the fuel filter because I knew I'd have to bleed the engine and had read so many horror stories on the internet in its infancy. Once I learned how simple it was, we made sure to document it, hence the Bleeding 101 topic. Sometimes I hear folks say you have to open injectors to bleed engines and when they share that they have M25 engines, I just wanna pull my hair out, but I send them a link to Bleeding 101!
