With the coil disconnected on the engine very important, put the drive in gear now try to turn the prop if the prop turns and the ball gears turn it's the coupler.
If the prop tuns and the ball gears don't turn it's the water pump shafts.
Then again it could be the spring.
This drive should always be run fully down.
Listen i don't want to even write this but i will and i will keep helping you not holding anything back, but your drive is beyond even trying to save.
And about your water inlet not being on the drive could you explain that one ?
I have the last of the stringer year drive, love it and i could have changed it out i had everything on a donor boat i bought just for the engine.
I kept my drive, my friends thought i was crazy.
All i did was change the transom shield one time and they are on like the 3rd set of boots. I can change my prop on the water and my drive turns further.
Yes i had shaft a problem and coupler problem but that was over 5 years ago not bad on a 86' boat.