It is almost a given that you need to change the waterpump impeller on these old motors. This will entail removal of the propeller, then the lower unit. While doing this have a look at the lower unit oil. if it is milky, then water is getting in. so the drive shaft and the propeller shaft seals will also need to be replaced.
I did this last spring on my 1978 version of this motor. The impeller cost me $23CDN, the 2 seals were $8CDN, at a dealer. I also replaced the O ring I changed out the Lower Unit Oil with Lubriplate 105 Motor Assembly Grease. Of course the recommended oil is also good.
You can probably get a better deal than I did from some of the online parts dealers.
If you have an Infrared Thermometer, you can measure the heat at the center portion of the right side (looking forward) of the cylinder. According to my Shop manual, it needs to be les than 173 Degrees Fahrenheit. I believe the bottom end of the range is 120. Some people recommend that the cylinder sidewall temperature be between 120 and 160 Fahrenheit, probably a good recommendation. The temperature on the opposite (left looking forward or port side) side, where the exhaust plate is attached, will be higher. Do the temperature soon after the start and keep checking it for a few minutes. If it is high within a minute or so of starting, shut the engine down and attend to the waterpump.
