[msmith]

After pulling the lower unit I noticed an O-ring in the drive shaft tube that evidently was cut when I pulled the shaft out. Where does this O-ring go on the drive shaft and how can I keep it in place when re-assembling?

[Walker]

There should be an indent right at the bottom of the driveshaft splines. That's where the o-ring goes. Its to keep grease(which you need to apply to the splines) on the splines during operation.