Sounds like the prop shaft seal behind the water pump cartridge is bad. Need to pull the cartridge out to replace seal. If not familiar with this engine it can be a challenge. If the drive shaft seal shows signs of leaking that also needs to be replaced. Hope the seals have not worn grooves in the shafts.

See link for the setup and click on Gear Housing Assembly page 1 and 2

http://www.marineengine.com/parts/mercu … ru-3226957

Note: I am not sure if the 1971 Merc 200 uses gear oil or grease in the gear case. If it needs grease oil will usually have leakage. The usual grease used for units that use grease is Luberplate 105 but if grease is required I would use John Deere Corn Head grease available at John Deere dealer or farm tractor supply.

BUT find out what belongs in the gear case and try it before you pull it apart it might OK. If gear oil is required the gear case needs the seals replaced.

Once fixed keep an eye on the gear case to make sure water is not getting in and service it regular.

the original drive shaft was steel the replacement was stainless because the steel rusts the oxide is harder than the steel surface and cuts it beyond repair a speedy sleeve can also be used to resurface the seal areas if the water pump and key still fit on the shaft snugly