Definitely time to tear down that distributor before it destroys itself! My experience with that was on my 1350, Many Moons ago. The steel snap ring that holds the lower rotor shaft bearing into the distributor housing had corroded and finally broken. These broken bits circulated around the inside of the distributor cap like a Cuisinart and eventually tore out the trigger pickup, ruining the entire distributor housing (since the trigger cannot be removed without destroying it).
Fortunately I was able to find a good used distributor at the local outboard wrecking yard for $50. Not gonna find one that cheap anymore!
Before you pull everything apart, first remove the 5/16"-headed-bolt and metal dist. pulley cover. Find the arrow that's cast into one of the ribs on the dist. pulley. Rotate the flywheel until the arrow is pointing at Dead-Center of the crankshaft. You should find that (3) vertical punch marks on the circumference of the flywheel align with the arrow. If things don't line up quite like that, be sure to note the current alignment so you can put it back the same way.
Providing, that is, that the motor is running OK the way it is, the Max Spark Advance is properly set, and the mis-alignment is no more than 1/2-tooth-off. The manual says that is OK.
Once you remove the distributor, bend down the locking tabs on the top and the top unscrews (right-hand threads). Pry out the upper bearing with a "tweaker" screwdriver thru the holes in the side of the distributor housing.
There is a nut that holds the rotor shaft/spacer in place. I found that a deep 3/4" socket works well for that task. Hold the rotor in a gloved hand and the retaining nut has right-hand threads.
GENTLY tap the rotor/shaft assy out the bottom while holding the copper trigger disk. A plastic mallet works well for this task. Mark the trigger disk so you'll know which way points outside. It's stamped from the factory, but the stamping may have deteriorated over the years. Note that the trigger is keyed to the rotor for proper alignment.
Word of caution: DO NOT allow the trigger disk to be forced down upon the trigger pickup while you're tapping the rotor out the bottom, as you may break the trigger and render the dist. housing useless. Sometimes the disk "welds" itself to the rotor shaft via corrosion, so be careful if things don't slide smoothly apart.
Once the rotor is pulled, disk out-of-the-way, the only thing left is the lower bearing. Remove the snap ring and drive out the bearing from above, using a suitable drift.
Assembly is the reverse of disassembly. Be sure to replace the snap ring, regardless of its condition. It's an inexpensive part that can cause $300+ worth of destruction.
Note I'm typing this from memory, might have left out a detail or two. Best to consult your manual or stop and ask questions if it's not working for you.
You can pull up a parts diagram here for your motor, based on its serial #.
HTH............ed