Re: Pulling the Engine
What "y-pipe" or o-ring is he talking about?? I thought the y-pipe was what joined the exhaust manifolds of a V6 or V8 together before they exited through the transom. Not one on an inline engine like yours as far as I know, unless we're using different terminology.
Most 4 cylinder mercruisers are pretty easy to remove. Mine took about 3 hours to remove and about 3 hours to reinstall, including pulling and removing the sterndrive and working through a few problems (main wiring harness connector was corroded together, had to break it apart to get it out then repair wires when it went back in).
$800 is probably about the going rate at a dealer. I would expect around half that much if it's a private mechanic.
Check the play in the steering at the gimbal upper pin. You can get to it to replace it through the transom with the engine out, have to cut a hole from the outside if you need to do anything to it with the engine in place.
Nothing else extra you need to do with the engine out, assuming no engine internal work is needed! Check compression to verify engine condition, and you might want to think about replacing the manifold and riser if they're original on a 13 year old motor. At least inspect them for internal corrosion.