I've had a lot of success on corroded outdrive housings by following these steps:
- sand or bead blasting to remove all the corrosion
- applying an aluminum conversion coating
- filling pits with an epoxy putty
- paint with epoxy primer
- paint with final color
I like the PPG Alodine 1201 for a conversion coating. I usually just use this Mercury procedure:
http://northamerica.mercurymarine.co...ation.php#1135