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Yes….Replace that seal, for sure; and as Dave says, do the shift shaft seal, too. A Speedi-sleeve is an expensive (for what it is) gizmo that is carefully drive down over the pitted area of the drive shaft, where the seal in the bottom of the water pump rides. It is a very thin, stainless steel collar that still allows the same OEM seal to be used. If you replace the seal but don’t install a speedi sleeve on the shaft, the pits in the shaft will chew up the brand new seal in the first trip. Even if you smooth out the pits, it will still leak. Since the drive shaft is the fastest moving shaft AND has the most water pressure at the seal area when it’s running, water WILL get into the gear case, unless you do a good job sealing it up. Oil will also get up into the impeller area and wreck the impeller. I wish I could tell you the exact part number that you need but I don’t know it. You have to measure the shaft in that area and then do an internet search….or maybe Dave knows. I have found them for other Mercs with similar problems, on eBay. I think the last time I bought one for a Mark 25, it was $34. But it is worth it.
Long live American manufacturing!