Re: OMC outdrive question
I'll share the benefit of my bad experiences with you.
Last season, I under filled the OD oil following poorly written instructions from the PO (my fault - should have consulted the manual). Predictably, I toasted my upper unit. The damage was extremely similar to what you describe: the gears were not blue or burned or damaged at all, and the bearings appeared to take the majority of the abuse. I decided not to attempt a repair (NOT a DIY job, it requires special tools), as having it done professionally (if you can even find anyone who does that on OMC anymore) was prohibitively expensive. Instead, I purchased a remaned and tested upper, which I mated to my existing lower.
The lower looked to be in very fine shape (turned freely, very little shavings in the oil), so I thought I'd dodged a bullet. As it turns out, not so much. I fought overheating issues all summer, and finally took it into the shop. They were just as baffled as I was, and replaced most of the parts ('stat, impeller, etc.) that I had already replaced. They ended up replacing all of the seals on the lower, and now everything is perfect. Point being, if the upper is ruined from running it without oil, the entire outdrive requires service, not just the toasty upper.
Unfortunately, I spent about $1500 on the used upper, and another few hundred on parts and labor, not to mention the crapload of time I personally invested, as well as the opportunity cost of a non-functioning boat. It was only after all was said and done that I heard about the SEI conversion kit for OMC powered boats. I truly wish I had known about and explored that option before I spent all of that time and money on an obsolete outdrive. Honestly, the SEI conversion would have cost about as much as I spent, or just a few hundred more. For that I would have had a warranty and a drive that has parts and service readily available. I kick myself on a regular basis for that one.
You've just replaced your engine. For what you will spend on fixing your OMC drive, you could upgrade to a modern unit. That's what you should do - if I had a time machine, it's what I would do.
Good luck.