Pool Leak and Decorative Rocks

I have a gunite/plaster pool that was built in the mid 80's. The builder, Aquarius pools, embedded some decorative rocks into the pool sides in 3 different areas near the deck. I'm sure this must have been or still is a common pool construction style. My pool definitely has a leak(s). I'm losing about 8 inches of water a week. I know from experience with a friend's pool this week that the evap rate around our area (Sacramento) is about 1" / week right now or maybe slightly more. From observing the water level in the past, the level seems to stabilize after dropping below the skimmer which is also about the same level when it drops below these mortared rocks. I cannot see any evidence of a crack or separation in the skimmer itself. I have tried a few drops of coloring agent in still water to see if I can detect anything, but I can't. I notice that there is evidence of some epoxy or other substance that has been placed on some of the motar cracks between these rocks. The mortar does appear to have some expansion cracking/separation between it and the rocks.

My question relates to how these rock designs are normally done if designed properly? Is a complete waterproof seal necessary with the rocks/mortar and pool wall, or is the pool wall actually extended up behind the rocks such that the rocks sit on a ledge sort of within the pool concrete form itself? If the later, then I assume as long as the pool shell behind these rocks is water-tight, it would not matter too much if the mortar develops cracks? If not, then I assume I will need to have these rocks remortared with a waterproof mortar?

Can anyone else pipe in with these sort of pools with embedded rocks and their experience with leaking if any?

thanks

Dave Mc