Sorry I missed the pics!
IMHO, it costs waaay too much just for the tools and parts you need to disassemble and reassemble the lower. Not even counting anything that is damaged or marginal. The upper may be savable with new parts, but will require some tooling and the bearings, seals, shims, gears and shaft ain't cheap either. Tools required are the spanner wrench and a torque indicator that will read accurately in the 6 to 10 INCH pounds range.
I would purchase a $500 drive if they let me pull the lower plug and see if it is a magnet and what's on it, and pop the top cap and look inside. Hand manipulating the shifter and rotating the prop the appropriate directions to feel the gears. Note, a lot of friction is created by the impeller. But at least you can tell if it shift super easy, locks up the correct way and turns properly. I believe the top cap bolts get 17-23 ft pounds torque.
I did replace my drive on a 1989 boat with an SEI before I swapped the motor out. It was, at the time, $1200 delivered and worked fine and has a no fault warranty you cannot beat. I think they went up a couple hundred since then. I got $950 for it while it was still in warranty. Guy who bought it is still cruising years later.