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The gear oil was more like sludge than oil. I don’t think it was ever changed or if it was not often. I do believe it has been resealed at one time as there was very little trace of water in the oil. It was black and not milky at all. I appreciate all of the input. It’s good to have other’s insight as to what might be going on. This is not the first motor I have tore down nor will it be the last I’m sure. I always seek out the obvious first when starting to work on a motor. Compression, spark and fuel. From there as we all know without the 3 working nothing else will either. I would of bought this motor even if I had checked the compression on it first because of it’s appearance. It will end up staying in my personal collection as I will never get out of it in sale for what I have into it.
Wiliiam, is your gear case filled with corn head grease? Or a similar grease? These “O” grade greases do not mix with water. 90 weight should be milky in color if any water at all gets in side there. These 5 1/2..7 1/2 gear cases are the hardest to get to seal up. IMHO! The shock absorber is the culprit. It can stretch and break the impeller housing. That housing is getting hard to find lately. I weld every shock thingie I work on now just to make sure it doesn’t stretch.
dale