Gear Oil leak shift shaft Help

"I dropped the lower the other

"I dropped the lower the other day to replace the impeller. I got it all back together this morning, and success. The impeller was working, and the engine got up to temp and I got warm water out of the transom area and through the prop when Id give it a little rev. But, I noticed oil steadily draining out above the upper shift shaft. There is a slot above it that it was coming out...is this slot there for a reason? And is it the bushing I need to replace that will cover this opening?
Look at the picture I took:
http://www.mikesphoteaux.com/oil1.jpg"

I do believe I screwed up when I didnt replace the oil o ring that goes between the upper and lower unit when I did the impeller...nor did I use any grease or sealer. That wouldnt cause that problem would it?

Also, when removing the lower for the second time in the last few days, I noticed there was a rubber like bushing around the lower shift shaft that crumbled and fell off. Im assuming this is a very necessary part...and does it help keep the shift shaft up? Because my lower didnt want to shift into reverse all the time because that shaft was too low to make full contact with the upper shift shaft.
See this picture:
http://www.mikesphoteaux.com/oil2.jpg"

Thanks in advance for any help. I think I can fix it, but right now I just want to sell it!"

"1 your upper carrier seal is

"1 your upper carrier seal is leaking gear oil. That needs to be addressed.
2 That "O" ring is called the "quad seal" and yes you do need it or you`ll lose all the gear oil .
3 The shaft is in a fixed position ,IT DOSENT MOVE UP.You have what is called a "GEN II "drive.
There must be more to this story."

"1. Would a kit like:
[url=""

"1. Would a kit like:
http://www.go2marine.com/product.do?no=159211F
fix that problem?
2.I saw the replacement seal sitting in the box with the impeller parts...I figured it was extra as they tend to include stuff because over the years there has been revisions to parts inside. I will replace that.
3. The "play" up and down is about 1/4 of a inch.
Can I just loosen the 2 screws holding down the lower shaft and take a look in there?"

"1 no, open the link i sent, g

"1 no, open the link i sent, go to 2A-3
that item goes in the gimbal housing.
2 not familiar with that seal,post a pic.
3DO NOT ATTEMPT TO RAISE THE SHAFT.
To you do so ,you will need to disassemble the complete lower unit to put in back in place. Look elseware for the shift linkage problem.
I`ll email my cell if you like."

"Great talking with you, you g

"Great talking with you, you got me all the info I needed and MUCH more! Thanks, you are a great asset to this site! Got my parts(including the retainer wrench) on order."