Re: MC-1 Lower Unit - Advice needed - found filler and small leak.
I would use a drill brush or die grinder and remove the paint from it and get a look to see if it is putty/epoxy, or if it is oxidized aluminum. Since the lower unit is not pressurized, epoxy would not create a problem.
If it is epoxy stick, then grinding it down will let you see how it was applied and if there is a weak spot on one of the edges of the epoxy. If that is the case, then grind it down some more, and rough up the metal about 1/2" beyond the edges just like repairing a hole in fiberglass. Get some epoxy stick and add some over it making it flush with the rest of the casing. If the "hole" is 1 inch, then grind/rough up the metal edges to about a 1 1/2" diameter, then apply the epoxy stick firmly and smear the epoxy to feather the edges. let it dry for the time suggested on the tube. Sand it smooth and paint over it.
I know this fix may seem like a "time bomb fix" but it really is not. There are several products that will do the job. JB Water weld, JB weld Steel stick, or Rectorseal EP-200. EP-200 has a strength of 1,200 PSI, handles temps up to 500 degrees F, 100% water proof, and will last a very long time. Does not rust, can be sanded and drilled, will not crack or shrink. I have used epoxy sticks in way more projects than I can count, from my jeep rock crawler, to home plumbing and it has never let me down. Just make sure you pick the epoxy stick that has the highest PSI rating in the store, and one that states it is designed for metal, and aluminum. Since your drive does not have much PSI at all, any of the epoxy sticks PSI ratings will work, but it never hurts to get the strongest in case it hits a rock or something later on. The key is to make sure you rough up the edges to give it a good grip, and when you apply it, press it FIRMLY into place working from the center to the edges. When applying the epoxy, keeping your fingers wet helps A TON. It keeps your fingers from sticking to the epoxy instead of the drive, and allows you to get it flat and smooth when smearing it, often times eliminating the need for sanding.
Being an engineer I know that there are lots of ways to fix any problem. There is not 1 right way to fix something. The right way is the solution that allows you to achieve the predetermined operative results. Using an epoxy that has a 1,200 PSI tensile strength, handles far more degrees than your drive will produce, and is as water proof as steel, will do just that, unless there is some other factor that I am missing.
I know that there is always the "what if it breaks for fails when I am on the water"? However that is an argument for any part of the boat because at some point and time everything fails and from the looks of your drive, even the OEM failed at one point. If you get the JB water weld, keep a tube on board. If you have issues on the water, you can apply the water weld under the water line and it will still bond and cure even under water in a pinch.
To me it is an easy choice. your choices are to replace your drive, or try this fix and if it fails, implement option 1. You have already ran the boat with this fix and it has proven that it works well.