Ah! We got it without having to remove the water pump! We took a saw and cut off part of the pipe (very little) and got the hose in place. Foolish on MB's part to design this like that. They should have left more of a gap between the pipes. There is no reason that should not have been done.
Funny thing is this thing was leaking in 2009 when I posted this and it was still the same hose... it had stopped leaking but it looked like it was about to pop. Glad to have it changed.
Old hose was shot!!
New hose (that I purchased here on Peachparts) was a thicker hose, unless the old one had shrunk down.