That drain hole is there to allow water to drain so that it does not freeze and rupture the case. When you doo see oil there it is indicative of a blown shift shaft seal, allowing LU oil to escape and drain out the drain hole.
Here is the parts listing for that engine:
http://www.crowleymarine.com/mercury-outboard/395.cfm
Item 15 in this link is the shift shaft seal which is leaking:
http://www.crowleymarine.com/mercury-outboard/parts/395_16.cfm
Gerry