'59 Mark 35A: shaft seal not flush with housing. Is this installed correctly?

I recently purchased a '59 Mark 35A and have finally gotten around to working on a few things. After removing and polishing the propeller, I noticed the shaft seal protruding from lower unit housing. The exterior of the bearing has paint on it, but it could be from a re-spray after the original bearing was replaced. I thought this was odd, so I removed the propeller and checked the shaft seal installation on my '58 Mark 30. It is flush.
I checked my Pre-1965 Mercury Service Manual, but it does not show specific shaft seal installation instructions for a Mark 35. Also, the Mark 35 lower unit oil is dark (will switch to Lubriplate 105 soon) as can be and does not show any evidence of water intrusion. Perhaps this is just fine, and I'll just chalk it up to the madness of Kiekhaefer's designs.

Re: '59 Mark 35A: shaft seal not flush with housing. Is this installed correctly?

Nothing wrong with either unit. They are of different designs, as the Mark 30 and Mark 35A are very different motors. The Mark 30 has the water intake in the gearcase bullet, so there is a space between the retainer and the bearing carrier - that space is where the water intake is. The water intake is on the underside of the AV plate on the Mark 35A, so there's no gap between the retainer and carrier on that one...
- Scott