Time to pull out tranny and find out what is going on with it. The bolts did not want to loosen on prop shaft but eventually with some super strength and WD40, came undone. The prop shaft coupler had a lot of play in it and the woodruff key was not particularly doing its job well. The couplers are brass and designed to give if you were to hit prop shaft to minimize the damage. More on this in next posts.

The tranny I bought off FB showed up and was used with a Chevy 350 motor. Notice the red arrows in the 3rd pic below which are pointing at arrows that tell you direction of tranny. Previous owner of tranny had a 351W and swapped to 350 but did not swap tranny direction. When he engaged his boat in reverse for the first time backing off trailer, it went forward instead. He sent me a note making sure to unbolt and rotate 180 confirming arrows line up according to the bad unit I yank out or I would have same issue as he did. This pic confirms the difference. The tranny on the right is from my boat.

My goal is to swap tranny and then open up the bad unit to find the failure. I might rebuild it and place back on the market if it is reasonable to do so.