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Start with the basics… Compression..It may be tough to check compression on this engine due to its compression relief system, best to crank it over electrically if it has electric start.
Drain and inspect the gear lube. There are two large oil drain/fill screws that have to be removed, one is just about the horizontal AV plate just above the propeller. The other is hidden under the forward part of the gearcase bullet. DO NOT remove the little phillips head screw near the bottom of the gearcase, this keeps the shift linkage in place. Good gear lube will be either a very dark color, or perhaps a golden brown color. “Milky colored” lube indicates a water leak. Raw water spells big trouble, no oil at all means trouble as well.
This engine will probably need a complete ignition/fuel system/carburetor overhaul to be a “reliable daily runner”. The water pump impeller should be replaced as well. This engine has a pressure tank system which requires a good two line fuel tank. Have a look inside the tank, it should be clean and dry. Fowled/gummed up fuel or a rusted tank spells trouble. This engine can be converted to a single line fuel tank system, but a fuel pump would have to be added to the engine.
Feel free to ask specific questions and post pictures…….D