quote rjoynt:
Without being the past owners of the motor I can only guess what happened. I believe that the original o-ring wore the shaft to the point that it started leaking. Putting the two rings in top to top probably helped for awhile but ultimately made it worse. I put in two rings on top of each other and slowed down the leakage tremendously. I think I will go the course of regular gear lube changes and monitor it.
Thanks for all of your input!
I think your on the right track on what your doing. I have sleeved lots of hard to do Merc shafts and others, but this one I would question???. I would fill the shaft as tight as I could with a needle fitting on the grease gun with John Deere Corn Head grease in the slot space. I doubt you would ever see a water leak again from the top to that o-ring sitting position.