Re: 84 125HP bottom end gear oil leak
There are two blind chambers on either side of the water pump. To keep water from staying in them and accelerating corrosion, small weep holes are drilled under the cavitatio/anti-ventilation plate. The oil you see should be residue from exhaust and should smeel more like gas than anything else. It should be normal.
As to the shifting problem, the lower shift rod goes straight through a plain seal. If it were binding here, it should bind in both directions. Take off the engine hood and watch the shift cable and linkage as someone else moves the control. Then, remove the cable from the clamp (one screw--easy) and remove the quick-connect from the ball end. Now try to move the shift both directions by hand. That should give you a better idea where the problem is.
Be aware that with the engine not running, it may be necessary to turn the prop a bit to let the gears engage.
