Re: 1971 mercury model 1150 thunderbolt 115hp
Water in with the gear oil means a seal is bad. It may also mean damage to the gears and bearings. I recommend you purchase a waterpump base, impeller, wearplate and all gaskets. The pump base will have a new driveshaft seal, which is likely candidate for the fix for the leak. Clean up the driveshaft, and oil it so the pump base will slide on w/o damaging the seal. Use new orings and gaskets as well. Refill the gearcase and use new gaskets on the gearcase plugs.
Run the motor for a while(10 minutes or so), preferably in the lake, and then drain the gear oil. if it is clean, you likely fixed the leaking seal. if it is milky, you still have a problem.
If the gear oil is clean, carefully run the boat near the launch, in case the gears are bad. If it works OK, you have been lucky....