I suspect you’ll need to disassemble the the crankshaft to get it right.

insert the crankshaft and reed case into the bottom of the crankcase and press in using an arbor press.  The crankshaft counter weights need to be supported (use a bolt and nut) to prevent bending the crankshaft. As I stated previously, it helps to put a witness mark on the reed cage/crankcase before disassembly so you get it lined up on reassembly. locating bolt won’t line up unless it’s properly lined up. There is a locking washer under the locating bolt to prevent it from backing out. It’s been 20 years since I did this maybe someone has other tips to help.   Seems like I used a washer to keep the crankshaft from damaging the reeds when removing and pressing crank/reed cage in.

Hopefully you can heat and beat the reed block into alignment,

If not, fear not, it was built by mere mortals and a mere mortal can
fix it,

KE7,KF7, KG7 and KG4 series are refined and enhanced versions of the KE7. Junk KE7 powerheads are
available and reasonable so you
can paractice and learn. Nothing like hand on experience,

1965 and prior Mercury Service Manuals are available used and
Mercury Parts Manual for your model are available reasonable ,
If you need parts, you need part number and name. Much can be learned from illustrated parts manual,.
New upper and lower crankshaft seals are long overdue.
Good Luck
Louis

Louis