Re: 1966 mercruiser qutdrive
Can't see the fuel pump in the pic, but I'm
guesin 
rolleyes
it's the old style Carter with the upside down fuel filter (filter on top), about $100 aftermarket, easy find. The fuel line between the pump and carb should be steel, not rubber hose, so you should get a piece of brake line and make yourself a replacement. Or, order a replacement if they are available, I just bent one up. With all the ethanol problems and an old fuel system (rusty tank?) you should add a water separating fuel filter, $30-50, could save yourself a lot of headaches.
On the seized/unseized outdrive, I would be suspicious of rusty bearings & gears and their condition. Have you popped the top cap of the upper unit to inspect the gears & bearings? I wouldn't venture to far from land with a questionable outdrive, could leave you stranded. Take it easy in the beginning and check the gear lube for rust/metal/water contamination often. Drain/refill if needed. Pressure testing the drive will show you if it needs to be resealed, and with water intrusion (rust) it's quite possible. Could be a ticking time bomb...
Have you replaced the lower unit water pump yet? Checked bellows? With a 66 I would expect a lot of maintenance items need to be addressed.
