Hello all, I have a 1957 Scott Atwater 16Hp and below is a list of things that are wrong so far.

Water in Lower Unit:  90w gear oil looks milky. 

Milky 90w coming out of small rear hole in lower unit. Does this point to one seal vs another?  On the 1957 16hp it was not clear where the front small hole would be indicating one seal vs the other. 

Engine looses top power when twist grip maxed. If I back off from maxed slightly it picks up power and speed.  I assume this might be due to the loose Mag linkage parts.  Im investigating that.  But does anyone have any other ideas.  I did synchronize the carb to the timing.    

Needs to have forward/reverse adjusted.  Is it necessary to remove the power head for this job?