I'm assuming you have an MFS25A (with 3 carburetors), as opposed to the MFS25B (fuel injected). Year is irrelevant for servicing a Tohatsu/Nissan OB, but precise model/serial is important. It would also help to know whether you have a Remote or Tiller model. You must shift briskly; if you "ease" into gear, you will get chatter, and will wear the gears and clutch much faster.
It sounds like you have 2 separate problems.
The stalling is more than likely due to dirty carbs. After the fuel system has been serviced, you must run the carbs dry at the end of each and every day. While the motor may run OK on muffs (you must block off the sub-strainer under the antiventilation plate to use muffs on that model, or you will probably not get enough water, and may ruin the water pump or overheat the motor), but running under actual load is a completely different thing.
The milkshake LU lube is due to water in the lube, probably due to bad seals in the LU. That will require a new seal kit. There isn't any gasket between the LU and the exhaust housing.
While you have the LU down, check whether you can operate it by hand. The drive shaft always turns clockwise; if you reverse it, you will cause the water pump impeller blades to reverse and flip, decreasing their life, or possibly damaging the impeller. You must turn either the prop or drive shaft in order to engage R. Expect that the prop might turn slightly in N due to the viscosity of the LU lube. The prop should ratchet in F if it is turned and the drive shaft if not turning, so that is normal.
If you are uncomfortable disassembling the LU for inspection and seal replacement, see a dealer. Same advice applies to checking the fuel system.
