seen that before, assuming your in the water in this video. The base gasket is leaking and your sucking in hot exaust at higher rpm`s because the water pump in the lower unit is above the water and the cavity is empty except for the hot exaust gasses
the easiest way is to place the lower in a stand using some 2 x 4`s and installing the upper on it , them remount the whole drive.
Theres way too much risk trying to force it to fit
oil from the drain holes does not mean the upper seals were the problem and most likely is the seal in/under the water pump base.Alpha 1 or the alpha 1 GEN II are both easily replaced. The play in the upper shaft is normal with the top cap off,
There are 2 seals in the upper , input shaft is...
turning the engine by hand with the bolt holding on the harmonic balancer with a 15/16” socket.
Not really recommended ,your taking a chance of breaking the bolt or stripping out the crankshaft threads.
Most of what you describe is a intake valve not seating all the way or a bad valve grind or...
