" Roger,
I had a Merc -76 402
" Roger,
I had a Merc -76 402 40hp, and I seem to recognize your problem.
The splines in the joint between crankshaft and vertical driveshaft might be worn down. If so, the motor is running like in neutral. But since the vertical shaft isn't spinning, the water pump isn't working. You can see there is no water coming out from the tell tale.
If you drop the lower unit, you can see the splines of the shaft are worn, but maybe not totally disappeared. The crankshaft splines seem to give up first.
I also had Merc -74 402 40hp with the same problem. That model didn't have stainless shafts, so corrosion (salt water) did a lot damage to the shaft splines. I bought this -76 model, after I was assured it had stainless shafts. I thought I could use the old motor for spare parts. Since my experience with the earlier motor, I dropped the lower unit periodically and inspected and greased the splines. Although there was a wear, more than half of spline was left when it broke. However, I hadn't been able to inspect the crankshaft, without taking off the power head. It ran till 1997. It seems that the crankshaft wasn't stainless (or bad quality).
You have to repair, or replace both crankshaft and vertical drive shaft.
My decision was to scrap the motor and buy a Johnson instead.
My confidence to Mercury has been spoiled (2 motors with same problem).
I sure hope you have a less severe problem, but this is my experience.
Robert "