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First, check the linkage under the motor cover. It stoops you from given the engine too much throttle when the motor is in neutral but can jam the system if you try to shift out of gear at too fast of speed. Or a link in that system could be broken/loose. If all looks OK the check your lower unit oil. If none or water, the gear case could be trash.
You should change your impeller.
It is located at the top of the gearbox, around the vertical engine shaft.
First, disconnect the gear control. Underneath the steering bracket, you'll see a long nut with a counternut. ( Maybe you'll have to shift FWD or BWD to get better access ). Loosen the counternut 1/4 turn and then turn the long nut up ( 2 open box wrenches 10mm ).
Then remove the 4 bolts holding from lower to upper the gearcase ( just above the anti-cavitation plate )
The gearbox should drop down easily.
Then remove the 4 screws of the waterpump ( top of gearcase, around the long vertical shaft ). Lift the waterpupp housing, you'll get the impeller.
To reassemble the waterpump, grease the cup in the housing with PTFE or silicone grease, and while pushing the housing down over the impeller, rotate the shaft clockwise.
Reassemble all the rest in reverse order.
Check and adjust the gear shifting...
Okay this is on total memory. The shift shaft for a lot of those engines goes right up through the pilot shaft and exits just in front of the block under the carburetor(s). You will see the **** linkage arm connected to this shaft sometimes it's double nutted. See if you can slide the lower unit back up to the housing and put a bolt in it to hold then undue the shift shaft linkage, Remove the bolt and drop the lower unit. Be careful of the water tubes and check make sure the rubber grommets are in place in the pump housing not on the tubes. Clean up the pump housing and install the new impeller kit. Put the impeller down the shaft on top of the impeller plate, lightly grease the inside of the housing the impeller plate and impeller. Then lower the pump housing down to the impeller while turning the drive shaft clockwise lightly push down on the impeller housing. This will fold the impeller blades all in the correct position and provide lubrication to the pump until the water gets into the pump. To make life easier re-grease the drive shaft spline and the water tube grommets this will ad ease in reinstalling the lower unit. be careful to make sure you thread the drive shaft, water tubes and shift shaft all in at the same time. After installation you may find you need to adjust the **** linkage.
first go to www.crowleymarine.com to get a picture breakdown of your water pump. website instruction, click on part catalog tab, click on omc Johnson and evinrude tab. choose product line, year tab, engine size, choose model. click on gearcase. the picture showes all parts you have and the correct order they go. ok now we are ready to disasemble the lower gearcase from the motor.(1) trim the outboard down using the tim and tilt system (2) shift remote control into forward gear, this lines up the shift rod so you can reach it. a picture of the linkage is refernce number 50 on the picture from crowleymarine.(3) Remove engine coul, under the carburators you will be able to see the shift rod. if you can't see it follow the shift cable to the shift linkage to the shift rod(4) the shift rod has a hole in the top, that a long screw goes through, connecting shift rod to shift linkage. remove this screw(refer to picture downloaded)(5) again refer to the downloaded picture remove these bolts that i list. number 66 there is 4. #77 there is 1. pull off #76 trim tab.#68 there is 1. #70 there is 1. lower unit will drop after you remove all bolts. remove the impeller housing. look at impeller you will see the fins are bent in one direction. put new impeller in with fins bent in the same direction. reinstall housing and gear case following my dirction in reverse order.