There is most definitely a seal under the water pump impeller plate.
If you buy a seal kit, it should contain the following:
New drive shaft o ring
New prop shaft seal housing o ring
New pivot pin o ring (small Phillips screw on skeg)
New drive shaft seal (under water pump)
New prop shaft seal
New shift rod seal (really an o ring)
New spaghetti seal
new crush washers for drain/vent screw
If you need any help with resealing, let us know. I can forward you some instructions I have typed up with pictures if you PM me your email address. there are a few tricks to this, which we have all screwed up on , but can save you a little frustration for your first time.
While the gearcase is off, most definitely change the impeller, and inspect the grommets, they are often dry rotted, or deformed. If either, toss them. Grease the new ones, to ease in gear case installation. Inspect the housing for damage, but I have done thousands of them, and almost always re use them. They are very robust.
If the coils are good, someone has already been in there, which saves you some money. Still, clean and dress the points, and re set, and test for bright blue spark that will jump a 1/4" gap, before re torqueing down the flywheel.
Take the carb off, clean and rebuild, along with updated fuel lines, if they are original.
Your compression is great. Great idea to test, before spending any more money.
Keep us updated, lots of great guys here to help.