i would think your overflow pipe is a major problem.if i understand the question water is going threw the pipe then into the dam.if so,it's a matter of when the dam breaks not will it break.this needs to be fixed as soon as possible.i do not think you need concrete on the dam,very few people do this.i do know one man who put concrete on his dam and water got under the concrete and he did not know until the dam blew out.as far as the pipe,yes you need to get it opened so water goes out the correct way.thanks.