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Back in 1987 Mercury only used a rectifier to convert the AC to DC. In 1988 they added a regulator. Back in 1987 flooded lead acid batteries with fill caps were the norm. As the battery overcharges during higher rpm operation some of the water in the battery boils off. You just need to periodically add some water to the battery to replace what was lost or risk killing the battery. It's actually a pretty reliable system with only a rectifier used to convert the AC to DC. The charging system is functioning as designed. There is a company that makes a rectifier with a regulator that some people retrofit for use on these older engines.