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Well, there will be no further problems if the stud is coated liberally with grease/gasket sealer prior to reassembly…Be sure to get inside that hole and clean out the salt from there as well….South shore of Long Island, my old territory…Wonder where that engine came from, perhaps one of he bigger dealers bought out some stale inventory from OMC. In any event, the engine must not have many hours to look that nice after being used in salt water….
Like I said, the best approach will be to add some sort of metal shim between the top of the stud and the gearcase housing, with a crow bar wedged in between. At this point, probably best to use some heat, even though the paint will get messed up a bit. Have an assistant pry down on the stud while you are applying heat to the exhaust housing where the stud passes through. Salt is pretty tough stuff, I don’t think there has been a solvent invented yet that can penetrate it. Shift the gearcase into reverse prior to heating, then it will just be pulled into forward gear while the gearcase is pulled down slightly to access the shift rod connector (you may have to spin the prop slightly to allow it to shift into forward while pulling downward).
Once the gearcase is off, you can straighten out the threads, or replace the stud….There is no way to sneak a bolt in there because of the shape of the exhaust housing.
Finally, I suppose there is the possibility that seized driveshaft splines are holding things together, but it doesn’t seem like you have gotten the gearcase to move down even the slightest bit…So, I’m thinking it is the stud…
Once the gearcase/water pump are off, be sure to run a tap through all the holes to clean out the salt. Be sure to use gasket sealer/grease on all the fasteners, especially the little water pump screws…Be sure to clean off the driveshaft upper splines and apply OMC moly lube liberally to the sides of the splines…Try to avoid getting moly lube on top of the driveshaft while may prevent proper seating due to a hydraulic lock caused by the grease.