i had seen a similar question.
i think water level will fall down.
This is because the weight of water being displaced is equal to the weight of the block of mass, when it is in the boat. As soon as it is immersed in water, it only displaces mass equal to mass of the volume of block.. that will be near zero....!
So more water rise in first case. So the water level will fall.
I think i am thinking in the right direction!