the mercrusier service manual spells it out. i use sm #2, for a '79 i think ya use #4. for my '75 drive
"inspect drive gear for pitting, chipped or broken teeth and excessive or uneven wear. Replace gear if any of these exist. Check tapered roller bearings and bearing cups if cups are pitted, grooved, scored, worn uneven, discolored from overheating or have foreign metal particles embedded in the cup. Inspect oil seal for wear, tears, roughness and proper spring position. if oil seal serviceability is doubtful, replace oil seal. inspect o rings for cuts, nicks hardness and cracks, if o ring serviceability is questionable, replace o rings. replace all damaged shims with new shims of same thickness."
as for if ya got the small spacer.
the smallest of the rounds rings is the small spacer. when ya got the small spacer, ya use a torque value to tighten the drive gear nut.
fwiw. i replaces my brg. set on my drive due to bluing (over heating, one of the criteria for replacment) of the brg. cups.
this thread may help too.