Graphite looking substance in bilage

[Caleroelofsen]

1987 stingray merc with a 454 mag and a alpha drive.
Shift cable is still smooth(shifted easily) but today when i was on the water it stalled shifting into forward started it back up and did the same thing into reverse. I open up the hatch to find this graphite like substance in the bilage and soon found that it was coming from somewhere near the transom and splatter everywhere. I also checked the engine oil and it was over full i don't know if that another issue or has something to do with the leakage or shift problem.

 

[Bt Doctur]

More likely the drive is self-destructing. Check the oil level and condition

 

[bruceb58]

Sounds to me like coupler is failing because of the graphite stuff but sounds like you have multiple issues.

 

[gm280]

Graphite looking stuff sounds like powdered metal. And that is never a good thing. I too think you have multiple issues and you should NOT be running it again until you locate that problem(s). Otherwise it could get even more serious and certainly more costly as well. JMHO