Yes the engine has been removed from the boat. I removed the flywheel housing to get a better look. The coupler looks good, there is no rubber dust, or any obvious damage to the coupler, it looks great. The splines are all even and there is no metal dust or shavings in the driveshaft or coupler.
I removed the flywheel and turned it around and to my surprise, there was no crack in the flywheel. I have NO idea what that was that look exactly like a crack in the picture, but the flywheel looks good, no missing, chipped teeth. There is no crack in the block housing back there either.
The rear water seal on the other hand was pushed out on the top half of the seal and leaking water a little. I got some pliers and grabbed the top lip and pulled and the water seal came right out. So that will need to be replaced for sure.
I removed the oil pan bolts (which several of them appeared to not be very tight, and then removed the oil pan. The oil looked dark, but not contaminated with water. On the bottom of the pan there was some black sediment which I think would be expected since this could be the first time it has ever been pulled.
Looking up into the engine the crankshaft, bolts, and everything else looked fine. There was no signs of rubbing, scratching or anything. The only thing I did not get to remove before it got dark was the crankshaft oil seal. I plan on replacing those anyways since I am this far in just for a piece of mind.
From looking at it, the only thing I can think of is that oil was coming out of the oilpan (old gasket) or the main oil seal and the water plug was leaking water and that is where I was getting the coffee w/creamer color. I will take come pictures after work when I get the oil seals out.