I just did mine this year. If you can get a finger between the back side of the bearing and the housing, I think it needs to go in a little bit further. I experienced the same while doing mine and hit it with a small sledge a few more times and it closed the gap. Hopefully you greased the...
Take off the shroud and disconnect the linkage. Try moving the shift mechanism by hand, Neutral should be a solid stop between forward and reverse. Put shifter in the neutral position and re-adjust the linkage to fit the drives neutral setting. Hopefully that helps.
While not familiar with the forward drive, I would suspect based on what you state that the O rings on the drain screw needs replaced. I would try that first before tearing too far into it. Might be a cheap fix.