Some will argue----Step #1 is a compression test.---Post the actual numbers here.-----Does tell tale hose come off the side of the engine block or off the top ?
If it still has the original head gasket you might consider removing it,------The new gaskets are improved.---Sierra is the best deal.----Inspect thermostat as they are often stuck open or missing.
The original mix was 24:1 on those.------But 1961 was the first year for needle bearings on big end of the rods.----So internally there is no difference with a 1965 model ( now rated at 6 HP ) that ran on 50:1 mix.----Another lively oil debate.
I do not see a 75 HP listed for 81.----Serial # of your motor ?----Copper color decals ?-----I think an o-ring fits in that groove.----Best to get this correct as mistakes will be expensive.