Casing Shavings in 1986 Volvo Penta 280 out drive gear oil.

[edlanta]

Just bought the boat and changed the gear oil. It was full of non-metalic shavings. I pulled the outdrive and then the top cap that houses the dip stick. The boss on the underside of the cap shows a lot of wear from the shaft nut rubbing on it. When I spin the prop the shaft raises up about an 1/8" and obviously rubs on the underside of the cover. What is the cause? Do I need an upper gear assembly???
Thanks!

 

[muc]

The idle is or was set too high. The washer at the bottom of the shaft is deformed and needs to be replaced.

That's my best guess without a serial number to know the exact upper you have.