Re: Mercruiser inboard/outboard lower unit question
That little hole is for draining water from the casting pocket where the shift shaft goes into the lower unit. Seperate the upper from the lower and you will most likely find that is where you are leaking.
No point in pressure testing the drive. It leaks. Oil coming out that little hole means its leaking between the upper and lower so a bubble (soapy water) test wont work.
Time to reseal. If your drive is more than a few years old, I reccomend resealing the whole drive.
You also need to make sure your drive doesn't have water in it. If gravity will force oil out, water is probably going to be an issue.