I went to take my 1978 Caravelle with a I/O mercruiser 165 out this weekend, and the first thing i noticed was while it was on the trailer out of the water, there was a small puddle of oil leaking out of where the plug goes (plug was out). Closer inspection led me to believe that this was gear oil from the lower unit. The trim was all the way up, but i can't imagine how it would leak into the engine compartment and out the drain plug hole without the motor running and that oil being thrown around. Well after checking oil levels i put it in the water anyways, and noticed that while beached, it was taking on water. I've inspected the u-joint bellows and cannot see/feel any holes. I do know that the exhaust bellows has a hole in it, but that shouldn't be it. Lower unit oil is milky too. The only thing i can come up with is a hole in the u-joint bellows that i can't see. I serviced L/U at the beginning of the season and changed the o-rings and gasket. So whadda ya think????