I'm installing a new waterpump. The pump is on the bike with hose and pipe connected. It is not bolted down yet.

Before I placed the waterpump I lined up the shaft by eye and it felt like it slipped into place when I installed it. And the bolt holes look to be flush. But when I look up at the waterpump from underneath where the weep hole is, I see part of the bare machined surface sticking out from the block. Is it supposed to be like this? I didn't think to look at the original while it was still installed. The original's does seem to have dirt that would be consistent with this exposure though. I just wanted to make sure before I start bolting everything up that this is ok, or if I need to take it back out and try to line up the shaft again.

I just did mine 2 days ago. If the shaft did not mate then ,like you said the casting would not be flush with the block. I had trouble getting those two shafts to line up and I had to try 3 times removing it , turning the shaft to what I thought lined up until it went all the way in and could go no further.
If you look at the two remaining holes and the backside of those holes can go no closer (flush to the block) you are good to go.
When I did not line up the shaft I had a gap there so I knew I did not  have it mated correctly. I never thought to look at what you are seeing since it  could not  get any better than all the way in.

So if it can not go in any further,  that shiny part must be normal.

I found another picture with a properly installed waterpump and it looks just like mine so I put everything back together and went for a ride. Seems to be fine.