Oil leak from alpha 1 driveshaft

Just puchased a 2000 bayliner with the merc 4.3 w/ Alpha One leg. After running the boat for a few weekends I noticed that the gear oil was leaking out of a small drain hole on the lower unit housing on the opposite side of the drain plug(slow leak). I removed the lower unit to check the seals in the shift shaft and to replace the impeller and water pump gaskets. When I had the water pump cover off I noticed that oil was slowly dripping out of the driveshaft into the water pump. Does this mean I need to fix the drive shaft seals or is this normal?? Do the impeller gaskets stop this leak?

 

I'm pretty sure the Alpha is designed NOT to leak oil all over the place. It would seem to be a safe bet you have a failed seal somewhere; the question is exactly which seal is faulty and how much damage the leak did before you caught it.

 

Sounds like oil is leaking into the exhaust galley. It's most likely either the seal in the upper unit taht fits around the vertical driveshaft (the one u see when u pull the lower unit off that has the water pump on it) or it's leaking around the water pump housing.