I think I found where my drive was leaking oil while in storage....

[Fiat4Fun]

Greetings all.
My boat was stored in my shop all winter, but I did notice that the cardboard under the drive had a oil stain on it. The boat is a 1986 with an alpha one, gen 1 dive.
Did a quick pressure test, and the pressure dropped within a hour.
I pulled the case apart, and it looked like the little o-ring for the oil passage was crimp in it. I assume this is where the oil/pressure leak is.

So, I will put it back together, but a few quick questions:
1. Should there be some sealer on the o-ring that goes between the upper and lower case?
2. Is there a portion for the shift lever to be in when the two parts go back together?
3. I see the white tube for the water, but there is a flexible black collar, does that go on the top or into the water pump side?
Any other advice is greatly appreciated.
Thanks

 

[Bondo]

Nope,.... No sealant,.....
Everything must be kept in forward gear,....
Black collar goes under the white guide tube,....

 

[Fiat4Fun]

Thanks so much for the info. I will put it back together tonight
Enjoy your weekend

 

[Fiat4Fun]

Update. got it back together, pressure testing right now, and holding at 15lbs. Should be good to go.
Thinking I should do my bellows and lower shift cable. Cable is over 10 years old, and I assume it does wear? Bellows look fine, but are 8 years of freshwater use...... thoughts?