I had the exact same problem on a 40-year-old pond. The solution for me was to put in a PVC syphon system and have the existing pipe filled with concrete. This can be done without draining any water from your pond.
The fact that the pipe his only 6 to 7 inches I do believe that will be a pretty good, and cost effective solution in his case.
Im with Essup, I don't think you are dealing with stainless steel pipe, appears to be just regular corrugated galvanized culvert pipe which unfortunately has a habit of rusting out faster then one would think.
Not sure that I understand the valve thing unless it is in front of the horizontal section of the pipe to allow for draining down of the water level, somebody put a lot of work into that back in the day, it also appears the overflow pipe goes straight down to a lower level then horizontally out thru the bottom of the dam, but its hard to tell for sure.
Either way I would fill it in with concrete well below the pond bottom and start completely over, with either a syphon system or a conventional overflow pipe, both of which can be installed by lowering the water level minimally. to replace the current one it appears the pond would need to be pretty much emptied to work on it.
Good Luck!
