Re: water in gear lube mercury outboard
I don't have the exact same motor as you, but there should be a large O ring at the base of the water pump, as well as a upper drive shaft seal which is in the inside of the bottom water pump housing. The leak could also be coming from the prop shaft seal.
But if you have gear oil coming out of the water intake, more than likely it is going to the seals on the water pump base. If you buy the kit make sure you match the large O ring to the one that you take off. Most kits come with a couple different sizes. Attached is a link for a 1996 150 EFI, but it will give you an idea of which parts I am refering to. Make sure if you order the parts you do not use the ones in this link as they might not fit you L/U.
The part numbers I am referring to are number's 31, 32 and 33.
http://www.crowleymarine.com/mercury-outboard/parts/1679_300.cfm
Hope this helps and good luck.