Re: Removing outdrive and motor
"While the plugs were out I did a compression test and had no compression in #1 and#3. Thinking bad head gasket I had head pulled and low and behold #1 piston is bad."
That's too bad. Usually zero compression is "just" a valve issue. Not a headgasket issue or a piston issue. Sounds like it got run a long time with bad valves? What was wrong with the piston? Did it have a "valve sized" hole in it?
Hints: yes, check everything, bellows, gimbal bearing, u-joints, shift cables. Also check your exhaust manifolds, risers, and exhaust shutters. Clean the bilge real well. Check the wires for the trim that go through the transom, then tend to corrode/break in a spot that's nearly impossible to reach with the motor in. Inspect the steering sytem and especially the tiller arm/shaft for excessive play. All kinds of things to check when a motor is out and an outdrive is off.
Good luck with the rebuild.