Yup, I cringe when I barrel test old motors. You can see all of the unspent oil that comes out of the exhaust ports.
I am overhauling a 1960 Johnson 5.5hp CD-17 right now. Same motor as yours. I did the electrical a few years ago. This spring it was a carb rebuild with all new filters, new head gasket, new base gasket under the powerhead, new impeller, and a bunch of miscellaneous fixes.
When you purchase the impeller, note that you need to know if you've got a plastic impeller housing or metal. They are different sized impellers so you need to pull it apart before ordering. Get the new gaskets and wear plate while you're at it.