oldboat1 - yeah it's definitely gear oil. That stuff have such a distinct smell, and it drips out the prop. Gonna check that seal out. The clutch dog I think is ok, it doesn't grind at all , gears seems to shift ok. I posted a pic above of the side of the engine where just behind the primer solenoid and above the linkage , there was some gas and oil residue on the bolts and case. It's not a lot but before I took it out on the water last time , I cleaned and dried it off. Re torqued those bolts( so I thought) and I noticed there was some gas/oil in that spot again. I'm thinking when it's under load in the water is when its doing it. The primer solenoid is dry as a bone so no leak/splatter from there. On just the muffs I don't see anything coming out of that area and took a spray bottle with some detergent soap and water to see if I could notice an air leak there. But there wasn't any. May just be when under load and pressure, it doing it. I really cannot figure where gas could be coming from in that location. It's not dripping from the flywheel. It;s not over heated or anything, but when I rebuilt the motor a couple of years ago, maybe i didn't seal it all that good? Not even sure if that's a problem here but it does seem abnormal gas/oil is collecting there. Might explain some air loss , gas oil loss. Thought id clean it up again real good, put some paper towels around that spot and take it on the water, see if it collects there again. And like you said, I do believe prop is a separate issue.
Thanks