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quite common symptom after someone mixes and matches a lower unit and upper gearbox without following the shimming procedure. There are shims that go under the top cover of the drive (exhaust housing cover). Too many shims and the upper gearbox leaks oil and water. Too few and the cover actually clamps the upper and lower together as the bolts are tightened. Often all the shims fall out of the upper when folks have them apart and they don't know where they came from.So there is something inside the sterndrive that is jamming.